The lack of rules to trace transfers of crypto-assets like Bitcoin and e-money tokens makes the technology attractive to criminals.
MEPs from the Committee on Economic and Monetary Affairs (ECON) and the Committee on Civil Liberties (LIBE) have now adopted a position for a law that could strengthen EU rules against money laundering and the financing of terrorism.
“Illicit flows of crypto-assets move largely undetected across Europe and the world, making them an ideal instrument to ensure anonymity,” said Ernest Urtasun (Greens), co-rapporteur of the ECON committee.
“As all recent money laundering scandals, from the Panama Papers to the Pandora Papers, illustrate, criminals thrive where rules allowing secrecy allow secrecy and anonymity. With this proposal for a regulation, the EU will fill this gap.”
Based on the new rules agreed by MEPs, all transfers of crypto-assets will have to include information on the source of the asset and its beneficiary, information which must be made available to the competent authorities.
The rules would also cover transactions from so-called unhosted wallets, i.e. 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 main purpose is to ensure that crypto transfers can be traced and suspicious transactions blocked. The rules would not apply to person-to-person transfers made without a provider, such as bitcoin exchanges, or between providers acting on their own behalf.
“We should facilitate the safe and proper use of crypto-assets by people of goodwill, as well as protection against the use of crypto-assets for terrorist financing, extortion, mining material sexual abuse or money laundering”, said co-rapporteur for LIBE Assita Kanko (ECR).
“But we are also looking to normalize the crypto world as it grows, implementing rules that create trust. More than a decade after Bitcoin’s inception, it’s high time we took these important steps for our citizens.
Due to their inherently fast and virtual nature, crypto-asset transactions easily circumvent existing rules based on transaction thresholds. MEPs therefore decided to remove the minimum thresholds and exemptions for low value transfers.
MEPs also want the European Banking Authority (EBA) to create a public register of companies and services involved in crypto-assets that may present a high risk of money laundering, terrorist financing and other criminal activities, including a non-exhaustive list of non-compliant suppliers.
Before making crypto-assets available to beneficiaries, providers should verify that the source of the asset is not subject to restrictive measures and that there are no risks of money laundering or financing of terrorism.
The new rules are part of a new anti-money laundering package, which sets out measures to strengthen EU rules in the fight against money laundering and terrorist financing. It aims to address shortcomings of the existing framework, which include ineffective implementation, weak oversight and insufficient detection of suspicious transactions.
The adopted text represents the draft mandate for MEPs to negotiate the final form of the legislation with EU governments.