Suitcases of money are out. Criminals looking to launder the proceeds of crime no longer run into customs with briefcases full of cash. They prefer to use cryptocurrencies, remain anonymous and send money around the world without being exposed by authorities. The EU is now countering this phenomenon with strict regulations for crypto money transactions: the rules for cashless money transactions will soon also apply to crypto currencies such as Bitcoin. In the future, transfers of digital assets must be clearly traced and identified. In this way, the EU institutions want to ensure that money laundering, terrorist financing and other criminal offenses can be more easily clarified.
Late on Wednesday evening, the negotiators of the EU Parliament and the member states agreed on a corresponding amendment to the law after months of negotiations. With the reform of the money transfer regulation, crypto transactions are regulated uniformly throughout the EU for the first time. “The requirements are strict, but overall proportionate,” says Markus Ferber, economic policy spokesman for the EPP group in the EU Parliament. Since transaction histories can be tracked in detail via the blockchain, the risk of money laundering in the crypto sector is manageable – “as long as you are careful at the interfaces to the regular financial system.” Blockchains are digital, decentralized registers on which cryptocurrencies are operated.
Specifically, the agreement extends the so-called “travel rule” from traditional finance to transfers of crypto assets. Accordingly, information about the source of the asset and its recipient must “travel” with the transaction and be stored on both sides of the transfer. Like classic financial service providers, providers of crypto assets will in future be obliged to share this information with the responsible authorities. Crypto service providers, such as the trading platforms Coinbase, Bitfinex or Bitcoin.de, are faced with a number of new obligations.
Until recently, those involved had struggled to deal with so-called anonymous wallets (simplified: crypto wallets). Because those who do not keep their crypto assets with a service provider usually only appear on the blockchain as a code made up of numbers and letters. Under the leadership of the French Council Presidency, which ends this week, the member states had spoken out against including anonymous wallets; Parliament was strictly in favour. In the end, the parliamentarians prevailed. In the future, crypto value service providers will be obliged to identify wallet holders as soon as they transfer more than the equivalent of 1000 euros at once to a wallet that the service provider manages. Private transactions without intermediary platforms or exchanges remain unaffected.
“Wild West of Unregulated Cryptocurrencies”
“We are putting an end to the wild west of unregulated cryptocurrencies,” says Ernest Urtasun, Vice President of the Green Party in the EU Parliament and responsible rapporteur for the money transfer regulation. “For the first time in the EU we will have meaningful regulations for crypto assets.” Left-wing MEP Martin Schirdewan said: “As with traditional bank transfers, it must be clear who is actually the sender and recipient of the crypto assets.” Drug cartels have long tried to shift their “bloody money” into Bitcoin and its ilk using false identities. Europol recently came to similar conclusions. A report said cryptocurrencies are increasingly being used to launder the proceeds of crime.
The crypto industry and lobby groups had opposed the new rules. At the end of March, the German association of the Internet and telecom industry Bitkom warned that Europe was in danger of “gambling away its future as an innovation driver in the crypto sector”. In addition to the French government, Germany had also spoken out against strict handling of anonymous wallets.