To prevent money laundering, terrorist financing, and other crimes, European Union (EU) lawmakers have passed new legislation to track transfers of crypto assets like Bitcoin in the same way that traditional money transfers are tracked.
Negotiators reached a preliminary agreement on a new bill aimed at ensuring that crypto transfers are always traceable and suspicious transactions are blocked.
“This new regulation strengthens the European framework to fight money-laundering, reduces the risks of fraud and makes crypto-asset transactions more secure,” said Ernest Urtasun, co-rapporteur for the Committee on Economic and Monetary Affairs (ECON).
According to Urtasun, the EU travel rule will ensure that crypto asset service providers can prevent and detect sanctioned addresses, and that crypto-asset transfers are fully traceable.
The agreement extends the so-called “travel rule,” which already exists in traditional finance, to crypto asset transfers.
This rule requires information on the asset’s origin and beneficiary to travel with the transaction and be stored on both sides of the transfer.
“Crypto-assets service providers (CASPs) will be obliged to provide this information to competent authorities if an investigation is conducted into money laundering and terrorist financing,” read the new legistaltion.
Providers will have to verify that the source of the asset is not subject to restrictive measures or sanctions, and that there are no risks of money laundering or terrorism financing before making the crypto-assets available to beneficiaries.
The rules would also apply to transactions from so-called un-hosted wallets (a private user’s crypto-asset wallet address) when they interact with hosted wallets managed by CASPs.
If a customer sends or receives more than 1000 euros to or from their own un-hosted wallet, the CASP will need to verify whether this customer effectively owns or controls the un-hosted wallet.
The new rules do not apply to person-to-person transfers that take place without the involvement of a provider, such as bitcoin trading platforms, or between providers acting on their own behalf.
