The fight for European crypto regulation continues. Participants in the tripartite negotiations between the EU Parliament, member states and the Commission on the controversial Transfer Funds Regulation (TFR) reached a compromise on Wednesday.
With the TFR regulation, the EU is trying to implement guidelines to prevent money laundering and terrorist financing in the crypto space. The discussion focused on different ideas about the basic obligation to collect transaction data and the proper handling of so-called “unhosted wallets”.
Since June 29 it has been clear that the collection of transaction data will be included in the final text of the law. No minimum quantity is foreseen from which the data will be collected. According to a press release, so far crypto transactions could easily exceed such thresholds. In principle, the data migrates with the transaction. Therefore, they are stored by both the sending and receiving parties. However, if the protection of personal data is in doubt on the part of the recipient, the obligation to transmit data does not apply. Transactions between two private wallets are exempt from regulation.
On the night of today, July 1, it was also learned that the EU had regulated the regulation of Bitcoin and Co. using MiCA. More on this here:
“Unhosted wallets” only need to be verified once
The regulation also provides a framework for transactions between wallets managed by crypto exchanges and comparable service providers (so-called CASPs) and those that are external to these structures. In cases where the client sends or receives more than 1000 EUR to a “non-hosted wallet”, the crypto service provider must verify that the wallet belongs to the client. This test must be performed once. So the fundamental ban on “unhosted wallets” is off the table.
Crypto service providers must continue to apply a risk-based approach to transactions with non-client third-party “non-hosted wallets.” Therefore, exchanges probe for money laundering and terrorist financing risk before approving such a transaction. In case of doubt, it applies a series of information gathering measures aimed at reducing this risk. This echoes the proposal of the federal government, which advocated the use of blockchain analysis tools on a case-by-case basis.
The crypto community remains skeptical
EU representatives spoke positively about the new rules. According to Assita Kanko of the Committee on Civil Liberties, Justice and Home Affairs, “the misuse of crypto assets will be significantly more difficult and innocent traders and investors will be better protected.”
Robert Kopitsch, Secretary General for the Advocacy block chain for europe, was more ambiguous for BTC-ECHO:
The Funds Transfer Regulation is not a work of art in the form adopted, but it allows the industry to remain operational taking into account the technological reality, including DeFi or self-custody wallets. Only the issue of data collection and privacy remains questionable, but the ECJ recently commented on this. And his decision suggests that the last word on the matter has yet to be said.
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