The European Commission (EC) has outlined a number of proposals aimed at tightening the regulation of cryptocurrency transfers using existing Anti-Money Laundering (AML) and Terrorist Financing (CTF) laws.
One important change is that it would discourage all cryptocurrency service providers from offering anonymous cryptocurrency wallets, while existing AML rules would be extended to the entire crypto sector, including all crypto asset service providers (CASPs).
“Today’s changes will ensure full traceability of crypto asset transfers such as Bitcoin, and prevent and detect their possible use for money laundering or terrorist financing. In addition, anonymous crypto asset wallets will be banned, ”said the European Commission.
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The providers must record the name, address, official ID number, customer number or the date and place of birth of the holders of cryptocurrencies.
“Currently, only certain categories of providers of crypto-asset services fall within the scope of the EU rules on combating money laundering and terrorist financing,” said a statement by the European Commission.
“The proposed reform will extend these rules to the entire crypto sector and oblige all service providers to subject their customers to due diligence.”
The cryptocurrency proposal outlines the future obligations of all Virtual Asset Service Providers (VASPs) to “collect and make accessible data on the originators and beneficiaries of the transfers of virtual or crypto assets they operate”.
The EC is concerned that the differences in anti-money laundering and terrorist financing laws between EU Member States are being exploited by organized crime for money laundering and terrorist financing.
“Virtual asset transfers are now outside the scope of EU financial services legislation,” the proposal says. “The absence of such rules exposes crypto asset owners to money laundering and terrorist financing risks.”
Current EU rules do not cover the traceability of virtual asset transfers and information sharing obligations between crypto-asset service providers, as current EU rules only apply to wire transfers, she adds.
CASPs must ensure that transfers of crypto-assets are linked to the originator’s name and the originator’s account number, if such an account exists and is used to process the specified transaction.
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Other details that CASPs need to collect in order to transfer crypto assets include the sender’s address, government identification number, customer identification number, or date and place of birth.
On the beneficiary’s side, the CASP must “implement effective procedures to determine whether information about the originator is incorporated into or follows the transfer of crypto-assets”.
These rules remain proposals until the European Parliament endorses the changes.