Crypto assets: new rules to stop illicit flows in the EU

Crypto-assets’ transfers would need to be traced and identified to prevent their use in money laundering, terrorist financing, and other crimes. According to the European Parliament:

• The legislation is part of the new EU anti-money laundering package
• Aim is to ensure crypto-assets can be traced in the same way as traditional money transfers
• There is an absence of rules for tracing transfers of crypto-assets like bitcoins and electronic money tokens

On past 31 March 2022, MEPs from the Committee on Economic and Monetary Affairs (ECON) and the Committee on Civil Liberties (LIBE) adopted, with 93 votes to 14 and 14 abstentions, their position on draft legislation strengthening EU rules against money laundering and terrorist financing.

Traceability of transfers of crypto-assets

Under the new requirements agreed by MEPs, all transfers of crypto-assets will have to include information on the source of the asset and its beneficiary, information that is to be made available to the competent authorities. The rules would also cover transactions from so-called unhosted wallets (a crypto-asset wallet address that is in the custody of a private user). Technological solutions should ensure that these asset transfers can be individually identified.

The aim is to ensure that crypto transfers can be traced and suspicious transactions blocked. The rules would not apply to person-to-person transfers conducted without a provider, such as bitcoins trading platforms, or among providers acting on their own behalf.

No minimum thresholds

Due to their speed and virtual nature, crypto-asset transactions easily circumvent existing rules based on transaction thresholds. MEPs decided therefore to remove minimum thresholds and exemptions for low-value transfers.

The rol of European Banking Authority

MEPs want the European Banking Authority (EBA) to create a public register of businesses and services involved in crypto-assets that may have a high risk of money-laundering, terrorist financing and other criminal activities, including a non-exhaustive list of non-compliant providers.

Before making the crypto-assets available to beneficiaries, providers would have to verify that the source of the asset is not subject to restrictive measures and that there are no risks of money laundering or terrorism financing.

Next steps

The adopted text represents the draft mandate for MEPs to negotiate the final shape of the legislation with EU governments. The EP as a whole should vote on it during the plenary session in April (this month of April).