Yesterday, the first EU-wide regulations on the traceability of anonymous crypto payments were issued.
From now on, users of crypto currencies must identify themselves when making crypto payments. The previous “Travel Rule”, which is known from banks, will be extended for this. It requires that information about the source or sender of the money and its destination “travel” with the relevant transaction .
Goodbye anonymous crypto payments – traceability even with the smallest amounts
Today’s preliminary deal between the EU Commission and the EU Parliament spoke on Wednesday about the traceability of crypto payments. The aim of the regulation is that anonymous crypto payments must be fully traceable. This is intended to prevent unauthorized cash flows, such as for the purpose of money laundering or terrorist financing.
The regulation is part of the new EU anti-money laundering package and will be combined with the “Regulation on Markets in Crypto-assets (MiCA)” agreed.
Providers of crypto assets, such as crypto exchanges, must provide information to the authorized authorities upon request if they are investigating a money laundering or terrorist financing case. However, if there is reasonable doubt that a crypto provider does not comply with data protection regulations, the data does not have to be sent with the transaction.
Providers must check crypto payment sources
You must also verify the payment sources before making the crypto payment – that is, the source in question must not be subject to “restrictive measures” or sanctions. Likewise, the provider of crypto assets must be able to demonstrate that no money laundering or terrorist financing is being pursued. According to the agreement, providers who do not do this will in future be stored in a separate register for “non-compliant and unsupervised providers of crypto assets” – albeit in the MiCA regulation. If providers are in this register, they are no longer allowed to trade with EU crypto providers.
The members of the EU Committee LIBE (Committee on Civil Liberties, Justice and Home Affairs) intentionally decided no minimum limit for the planned traceability of crypto payments. According to MEPs, these are good at falling below existing minimum limits and thus avoiding the mandatory traceability.
Crypto payments from unhosted wallets also affected
The regulation also affects crypto payments from unhosted wallets. An unhosted wallet is not provided by a service provider but is privately owned by the user. This acts independently and uses the blockchains independently of other users. Anonymity, in turn, is a thorn in the side of most governments. Therefore, the “Travel Rule” described above should also apply here if an unhosted wallet trades with a wallet provided by a crypto service provider. In case the user sends or receives more than 1. EUR to their own wallet, a crypto service provider would have to check whether the unhosted wallet actually belongs to this user.
The regulation expressly does not refer to person-to-person crypto payments without a crypto service provider as an intermediate step. Nor should it apply to crypto service providers who trade with each other.
Assito Kanko, the Belgian co-rapporteur of the LIBE committee, is clearly satisfied:
Crypto assets have been under for too long stayed under the radar of our law enforcement agencies. Terrorists used cryptocurrencies to raise funds, access child pornography, and criminals used it to launder their income.
This has severely affected people’s lives and raised doubts about the crypto sector. Today we took a big step to address these issues. It will be much harder to abuse crypto assets and innocent traders and investors will be better protected. The expanded Travel Rule will make this world a safer place.
Others, however, note the rule with horror . The MEP Dr. Patrick Breyer of the Pirate Party comments:
These rules will deprive law-abiding citizens of their financial freedom. For example, opposition figures like Alexej Navalny are increasingly dependent on anonymous donations in virtual currencies. Banks have also blocked donations to Wikileaks in the past. With the gradual abolition of real and virtual cash, there is a risk of negative interest rates and the supply of money being shut off at any time. We should have the right to be able to pay and donate online without having our financial transactions recorded in a personalized way.
There is no justification for this Virtual elimination of anonymous virtual payments: where previously virtual assets were used for criminal activity, prosecution was possible based on the applicable regulations. A complete ban on anonymous crypto payments will not have a significant impact on crime. The stated goal of fighting money laundering and terrorism is just a pretext to gain more and more control over our private businesses.