A possibly transformational digital assets regulatory proposal threatens to shake up the European crypto scene. To combat money laundering and terrorism financing, two key European Parliament factions released a policy framework. The drafts were led by Assita Kanko (ECR) and Ernest Urtasun (Greens–EFA). Currently, banks and payment processors must preserve “traveling” information for several years. The policy only kicks in when a transaction surpasses €1000.
The Financial Action Task Force is an international organization made by the G7 group of countries to fund anti-money laundering and terrorist attacks. Some have complained that the regulation plan is too closely aligned with the official advice of the FATF. According to Thomas Spaas, a Belgian attorney focusing on cryptocurrency law, the FATF intended to be having such a major influence on how European legislation is being shaped. As a result of such legislation, cryptocurrency exchanges will be required to do much more of what they were doing: maintaining clients’ records. This meant additional paperwork for cryptocurrency companies and yet another hurdle to surmount for new entrepreneurs. The regulation was enacted without the involvement of the FATF.
When it came to cryptocurrency transactions, Kanko and Urtasun proposed that the threshold be lowered, effectively obliging exchanges and wallet administrators to document the travel data for every payment. Among the information that European authorities would get are the names of both the sender and recipient and the sender’s residential address, passport number, and wallet addresses for both sender and recipient.
In their draft, Kanko and Urtasun believe that minor cryptocurrency transactions are frequently used to sponsor terrorism or launder money and that this is a problem. According to the MEPs, a loophole like this would allow criminals to exploit digital assets to pay and conceal their actions because illicit capital can flow anonymously across borders without being identified and has a high probability of going undetected explain. Accordingly, it would be necessary to abolish the €1,000 barrier for cryptocurrency transactions.
It also includes establishing an allowlist of cryptocurrency exchanges that have successfully conducted satisfactorily Know Your Customer (KYC) processes for users. They may be excused from the requirement to document every cash transaction. Kanko particularly cited Binance as a cryptocurrency exchange that might potentially earn a seat on the allowlist if their application is approved. The draft law prompted a heated debate among those working in the European cryptocurrency industry. The European Union’s key participants are frequently sympathetic to and relaxed about the legislation being developed in Brussels. Despite this, business owners are concerned that the substantial enlargement of the travel rule may result in the region losing its ability to compete on a global scale.
A thorough implementation of the ‘journey rule’ would be challenging because not everyone reveals a significance for storing and transmitting this specific information. According to Marc Toledo, managing director of Belgian crypto exchange Bit4You and president of the Blockchain Association of Belgium, it would be far simpler to establish a global record of identifiable addresses. This method is also employed in banking. According to Toledo, the European Union should not consider cryptocurrency an adversary in the fight against financial crime
