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EU's upcoming crypto AML regulation (TFR)

marioIT

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Sep 6, 2019
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I just received this via twitter.
It's about the upcoming crypto EU regulation proposal. I'd say it's interesting to keep you up to date with what's happening at the EU parliament.


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I hate to ring the alarm bell again, but the EU Parliament leaves us no choice.

This time it concerns a crackdown on unhosted wallets in the upcoming crypto AML regulation (TFR).

The ECON committee vote is on Thursday and the draft includes some absolute red flags:

Background: The EU Commission’s AML package includes a revision of the Transfer of Funds Regulation (TFR) that will extend the obligation of financial institutions to accompany transfers of funds with information on the payer and payee to crypto assets.
Initial proposal from the EU commission: EUR-Lex - 52021PC0422 - EN - EUR-Lex

Initial draft report from the EU Parliament: https://www.europarl.europa.eu/doceo/document/CJ12-PR-704888_EN.pdf

It is the EU implementation of the so-called FATF travel rule that basically says that crypto service providers (exchanges, custodians etc) have to share personal information (name, address etc.) of their clients for transactions between one another.

The EU Parliament is currently discussing and amending that proposal.

And the latest draft compromise before the vote on Thursday introduced/aggravated some absolute red flags.

First red flag
Different from the initial proposal that only required to collect (not verify) personal data from transfers made from/to an unhosted wallet, the draft now requires to “verify the accuracy of information with respect to the originator or beneficiary behind the unhosted wallet”.

But it doesn’t say how exactly a crypto service provider should be able to verify the unhosted counterpart :rolleyes:

The consequence of this, imo, is that most crypto companies won’t be able or willing to transact with unhosted wallets anymore in order to stay compliant.

Second red flag
For every crypto-transfer from an unhosted wallet over 1k EUR, companies are obliged to inform the “competent AML authorities”.
For ALL these transactions, even if there is no sign/suspicion of money laundering.
This is an absolute violation of privacy rights.

Third red flag
One year after entry into application, the EU commission will assess the need of “additional specific measures to mitigate the risks posed by transfers from or to unhosted wallets, including the introduction of possible restrictions”

This means that the EU Commission might be prohibiting transfers from/to unhosted wallets entirely, as was already suggested by some members of the Parliament in an earlier draft - see Art 18 b on page 45 here:

Forth red flag
While the FATF travel rule only requires these measures for transactions over a certain amount (1k$) and the TFR for fiat (wire transfers etc) only requires the information sharing for transfers over 1kEUR, the draft sets no minimum threshold for crypto transfers.
That means that soon every single satoshi transaction that is not purely P2P will have to be accompanied by the sharing of personal information.
This is a totally unjustifiable double standard. If anything, the AML requirements for #cryptocurrency should be lower, since blockchain-based transfers offer new and additional ways to track and monitor.

There are more problematic passages in the text (e.g. blacklist for entities without legal entity), but these are the main ones to focus on imo.

This proposal cracks down on unhosted wallets & creates huge data honeypots for hackers.
It will lead to a system that is very close to SWIFT today, where every crypto transfer (except real P2P) is accompanied by a transfer of personal information.

The regulation is led by @ernesturtasun from the Greens in the ECON & @Assita_Kanko (Conservatives) in the LIBE committee.

Reminder: These are not the final rules. After the vote on Thursday, final negotiations with the EU Commission & Council (trilogues) will start.

What is concerning is that this time, different from the POW-ban in the MiCA regulation, the Council (member states) seems to be on the same page with the EU Parliament on these issues (no threshold for crypto transfers, crackdown on unhosted wallets etc.).

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What you can do?
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Contacting the MEPs and raising these issues both privately (email etc) and publicly (twitter is more effective than most think) is already a good way to start. Here is the list of ECON members:
 
People will switch to DEX-es and continue to trade as usually.
No, the vast majority will not. Because they are mainstream, still calculating their "wealth" in fiat and do not know how to cash out.
So, this crypto AML will be very efficient in limiting the popularity of crypto. And that is the overall goal of European governments. Mission (almost) accomplished!
 
Well, the hope for the EU is anyway very limited.
Imo the popularity of crypto will not be driven by that increasingly isolated, incompetent and declining area and it will not matter much what happens there increasingly.
If you can, plan accordingly.
 
The question is what a counterattack will be on this from all those with unhosted wallets, some ideas?

People will switch to DEX-es and continue to trade as usually.
What exactly is that, any explainer please?
 
DEXes won't help since how are you going to cash out or pay a service when living in the EU
Absolutely correct. DEX is useless for cash out. And that is exactly how governments are going to limit the usability of crypto for the average user. Because the average user still calculates in and with fiat. I mentioned that already in post #4 of this thread:
No, the vast majority will not. Because they are mainstream, still calculating their "wealth" in fiat and do not know how to cash out.
So, this crypto AML will be very efficient in limiting the popularity of crypto. And that is the overall goal of European governments. Mission (almost) accomplished!
 
DEX can avoid AML ?
Everything will depend on your wallet and previous transactions.
98% of all transaction on bitcoin could be already traced to an individium without KYC and AML.
For the remaining 2% they create/d 3rd party services to fill that gap however when the regulations come to play you will only be allowed to get fiat or pay a service when your wallet is known to your id even when your wallet remains in the 2%.
 
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DEXes won't help since how are you going to cash out or pay a service when living in the EU
- Then don't cash out -- pay with crypto for some things; or hold it.
- Or - can't one cash out after having left EU?
- Or - can't one cash out, while in EU, via p2p: to a bank or in cash by meeting a person physically?


Everything will depend on your wallet and previous transactions.
98% of all transaction on bitcoin could be already traced to an individium without KYC and AML.
For the remaining 2% they create/d 3rd party services to fill that gap however when the regulations come to play you will only be allowed to get fiat or pay a service when your wallet is known to your id even when your wallet remains in the 2%.
I'd say it's not 98%, but more like 96.78%. Or even 97.09%

Then why not use swap bitcoiin with monero or use mixer services?
 
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- Then don't cash out -- pay with crypto for some things; or hold it.
- Or - can't one cash out after having left EU?
- Or - can't one cash out, while in EU, via p2p: to a bank or in cash by meeting a person physically?



I'd say it's not 98%, but more like 96.78%. Or even 97.09%

Then why not use swap bitcoiin with monero or use mixer services?
How are you going to pay for some things IF the goods and services you want don't accept your crypto ?
You guys need to understand its the same basic as with russia.Who holds the desired resources dictates the rules not the other way round
Monero is tracable.Its long known fact.
Mixer is an option CURRENTLY but it can quickly get your account freezed when using a third party or services unwilling to accept these funds.
Also Mixer services are clearly hunt by agencies.Not just one service provider has been closed by them.

And finally like we posted above once the regulations will be implemented mixers will be worthless in the EU
 
How are you going to pay for some things IF the goods and services you want don't accept your crypto ?
You guys need to understand its the same basic as with russia.Who holds the desired resources dictates the rules not the other way round
- by cashing out via p2p or by meeting in person; only in small amounts that are enough for living
- monero isn't traceable/tracable
- and who is it who holds the desired resources in this context? "desired" by who?
 
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Everything will depend on your wallet and previous transactions.
98% of all transaction on bitcoin could be already traced to an individium without KYC and AML.
For the remaining 2% they create/d 3rd party services to fill that gap however when the regulations come to play you will only be allowed to get fiat or pay a service when your wallet is known to your id even when your wallet remains in the 2%.
That does not make sense.
If 98% is already known, why do you need this massive crap with aml/kyc/fatf poop now. Since everything is known, there is no need.
Theory: That is just some claim from mass media without much substance ;)
 

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