The EU Parliament and Council have reached a provisional deal to curb money laundering and terrorism financing in Europe by implementing the "travel rule" on transfers of crypto-assets.
Co-rapporteur for the European Parliament Committee on Economic and Monetary Affairs Ernest Urtasun said:
This new regulation strengthens the European framework to fight money-laundering, reduces the risks of fraud and makes crypto-asset transactions more secure... This regulation introduces one of the most ambitious travel rules for transfers of crypto assets in the world.
Once implemented, the agreement will require crypto-asset service providers (CASPs) to collect information about the originator and beneficiary of crypto-asset transfers which will be made available to the recipient CASP. CASPs will also be required to verify that the source of the crypto-asset is not subject to restrictive measures or sanctions prior to making crypto-assets available to beneficiaries.
In contrast to bank transfers, the deal imposes no minimum threshold or exemption for low value transfers. This is intended to combat attempts to circumvent restrictions by splitting large transfers into multiple low value payments. Despite concerns raised by industry, the deal does not guarantee that recipients of transaction information will uphold privacy standards.
The new deal also covers transactions from un-hosted wallets (wallets in the custody of a private user) when they interact with hosted wallets managed by CASPs. In the event a customer sends or receives more than €1000 euros to or from their own un-hosted wallet, the CASP will be required to verify whether the un-hosted wallet is effectively owned or controlled by the customer. It is not clear how these measures will impact transfers from un-hosted third party wallets. The travel rule will not apply to person-to-person transfers not involving a CASP.
Negotiators have also agreed on the establishment of a public register for non-compliant and non-supervised CASPs, with which those based in the EU would not be allowed to trade. The register will be established under the EU's comprehensive Markets in Crypto-Assets (MiCA) regulation. The new anti-money laundering measures are expected to be implemented on the same timetable as MiCA, which is expected to come into force in 2024.
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