Crypto transfer law: EU regulates the “Wild West”

Those who use cryptocurrencies usually act anonymously. Bitcoin and Co. are therefore popular with money launderers and fraudsters. The EU Parliament has now passed the world’s first comprehensive regulation of digital currencies.

The EU wants to tighten the leash on the crypto markets. With a large majority, the EU Parliament today voted in favor of the first EU law on crypto transfers. This will introduce stricter rules against money laundering with cryptocurrencies such as Bitcoin. The EU countries still have to agree, but this is considered a formality.

The law is not a revolution. Binance and other major crypto portals are already largely in line with the EU. Now, however, the same rules should apply throughout the crypto world as in the traditional banking sector.

Safe place instead of “wild west”

When it comes to measures against crypto money laundering, the EU focuses on the point where Bitcoin, Ether and other digital currencies are exchanged for conventional money such as euros or US dollars. Therefore, direct transfers between holders of cross-platform crypto wallets are left out. But they would be difficult to control anyway.

So far, the situation on the digital money markets has been comparable to the “Wild West,” says CDU MEP Stefan Berger, who worked on the regulation for the EPP group. But now it will be a safe place for consumers and investors.

“First, we classify coins in order to be able to assess them,” explains Berger. “Then we are also clarifying consumers’ rights to information, and therefore coin issuers must from now on create a white paper in which they must address the underlying technology, risks, exchange and return rights and much more.” Based on this data, everyone should be able to decide for themselves in the future whether to buy a cryptoasset or not, according to the CDU politician.

“Abuse through manipulation is prevented”

Even if cyber currencies are not a reliable hedge against inflation risks in view of extreme price caprioles, the acceptance of crypto options is increasing. That’s why there are more and more intersections between the traditional and the crypto markets, says Mairead McGuinness.

The Commissioner responsible for financial services believes that the new EU regulation will first and foremost ensure more legal certainty. “Secondly, rules will be introduced to prevent abuse, for example through manipulation in the crypto markets,” says the commissioner. “We also want service providers and providers in the industry to comply with money laundering regulations.”

Third, platforms and crypto exchanges would be subject to national surveillance authorities. And fourthly, the providers should have access to information about the sender and recipient of the transactions, according to McGuinness.

Pirate Party: Law deprives citizens of their freedom

The law effectively prohibits anonymous payments. A problem that is heating up spirits – in addition to the question of whether the high energy consumption of cryptocurrencies is not reducing the EU’s climate goals to absurdity.

Not only the MEP of the Pirate Party Patrick Breyer considers it a civil right to be able to pay with cryptos as anonymously as with cash. “For example, to be able to donate to Wikileaks if the banks of the unveiling platform have once again turned off the credit card donations,” says Breyer. “For example, so that Russian citizens can support the dissident without fear of repression by the Putin regime.”

The fact that anonymous payments and donations in digital currencies are “totally prohibited from the first euro” has hardly any significant impact on crime, but robs law-abiding citizens of their financial freedom.

On the other hand, there is the argument that criminals use cryptocurrencies to launder money anonymously or to finance terrorism. But such criminal transactions can already be tracked better today than pure cash transactions.

The new regulation will come into force by 2025 at the latest

The crypto transfers of so-called independent wallets – a kind of digital wallet – can be downloaded anonymously as an app in a few seconds and can hardly be controlled even with the new EU rules. For transactions with these independent wallets, the information obligation applies to amounts of 1000 euros or more.

From July 23, the ordinance is to come into force in stages. For example, crypto assets linked to currencies – so-called stablecoins – must demonstrate larger financial reserves from July 2024 in order to be approved. The complete new regulation should then apply by January 2025 at the latest.