EU’s AML proposals risk it becoming a ‘crypto pariah’
08:17, 31 March 2022
The cryptocurrency community breathed a sigh of relief earlier this month when the European Parliament rejected a ban on proof-of-work digital tokens, but market watchers are on the alert again.
European Union lawmakers are set to vote on an anti-money-laundering (AML) package on Thursday, including an amendment to the Transfer of Funds Regulation.
The proposal includes a major overhaul of requirements for crypto assets service providers to hand over user data that one market watcher says will negatively impact the trading bloc’s status as a global centre for crypto use.
Transfer of Funds Regulation
“We believe that the implications can be significant, as adopting such a restrictive text poses the risk of the EU turning into a crypto industry pariah, which is the exact opposite of what the EU (European Union) regulators had in mind when they initiated the legislative process,” Marina Markezic, co-founder of EU Crypto Initiative and adviser to crypto projects tells Capital.com.
The proposed Transfer of Funds Regulation amendment, which will go before an EU parliamentary committee on Thursday has caused a stir among cryptocurrency market participants.
Last week, lobby group the EU Crypto Initiative red-flagged that the proposed document would effectively ban unhosted wallets, by barring “the ability to crypto asset service providers to transfer of crypto assets from or to a crypto-asset wallet not held by a third party”.
Specifically, this amendment would require crypto asset service providers to verify personal data behind all transactions, and inform “competent AML authorities” about every transfer between “un-hosted wallets” over €1,000 ($1,111.8).
1/5 ????[LATEST UPDATE] ECON-LIBE MEPs submitted amendments to the draft report on the Transfer of Funds Regulation (TFR) pic.twitter.com/XJSdXurb78
— EU Crypto Initiative (@EuCInitiative) March 24, 2022
Proposals ‘detrimental to the EU’
This led many in the crypto sector to fear the implications of such rules for the privacy of cryptocurrency holders.
“AML regulation was not written with the specifics of Crypto in mind and we see how the combination of both can be detrimental to the EU industry, but also to the privacy of individuals.
“The EU has one of the most stringent regulations in this regard and will cause heavy operational burdens on the crypto assets service providers,” Markezic adds.
A number of big players, including the world’s largest cryptocurrency exchange Coinbase, invited the crypto community to lobby the Members of the European Parliament (MEPs) to vote against the proposal. The company’s co-founder and CEO Brian Armstrong tweeted against what he termed, a “new crypto surveillance regime”.
Tougher rules than for fiat
He described the proposals as anti-innovation, anti-privacy, and anti-law enforcement and posted a link for EU residents to lobby their MEPs against the proposals.
1/ On 31 March, the EU Parliament will vote on its proposal for a new crypto surveillance regime. The proposal is anti-innovation, anti-privacy, and anti-law enforcement. Make your voice heard and contact your member here: https://t.co/b3Ll3xXiW4
— Brian Armstrong - barmstrong.eth (@brian_armstrong) March 30, 2022
In another tweet, Armstrong wrote on the latest draft of the Transfer of Funds Regulation treats crypto and people who hold it in a different way from fiat.
“This means before you can send or receive crypto from a self-hosted wallet, Coinbase will be required to collect, store, and verify information on the other party, which is not our customer, before the transfer is allowed.”
Like banks reporting a rent payment
“Moreover, any time you receive 1,000 euros or more in crypto from a self-hosted wallet, Coinbase will be required to report you to the authorities. This applies even if there is no indication of suspicious activity.”
Armstrong likened the proposals to a bank having to file a report every time one of their customers made a rent payment.
“Or if you sent money to your cousin to help with groceries, the EU required your bank to collect and verify private information about your cousin before allowing you to send the funds. How could the bank even comply? The banks would push back. That’s what we are doing now.”
The EU Crypto Initiative, which has been in continuous dialogue with MEPs on cryptocurrency matters, held a series of talks with the industry and MEPs in the days coming up to a vote.
Crypto ‘shall not fade’
The controversial proposal has galvanised cryptocurrency market players.
As I tweet, sleep-deprived #EU #parliamentarians negotiate shortsighted amendments to the Transfer of Funds Reg (TFR) that may severely restrict the EU citizens’ ability to use one of the most basic #Web3 infrastructure: #WALLETS. @DrStefanBerger @ECPM_official @EuCInitiative
— Silke Noa (@silkenoa) March 30, 2022
Independent developer Samuel JJ Gosling, says this is the first time he has engaged in lobbying MEPs over crypto regulation. “I have no experience in or past notations to lobby Irish MEPs on the matter of regulation of the crypto asset class. It is only recently I am seeking to outreach upon hearing the contentiousness of the ballot on Thursday,” Gosling says.
“The efforts of this realm of technology shall not fade under any regulation, so it is best to negotiate policies that compliment both sides instead of disenfranchising the means of individual sovereignty,” says Gosling.
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