EU Parliament May De-anonymize Crypto Wallets

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  • The EU parliament will vote on Thursday over de-anonymizing crypto wallets
  • The council will vote on exchanges requiring key information on all crypto deposits and withdrawals
  • This is the EU’s implementation of the FATF Travel Rule that was extended to crypto in 2019

The EU Parliament, fresh from narrowly voting down a ban on proof-of-work coins, has now turned its attention to private cryptocurrency wallets. Members will vote on Thursday on an amended Transfer of Funds Regulation (TFR), which would see, among other changes, exchanges and other crypto providers required to confirm the identity of intended recipients when users send funds as opposed to merely collecting them. Implementation of the Financial Action Task Force’s (FATF’s) Travel Rule has been slow in coming, but this interpretation goes further than the guidelines demand.

Travel Rule Implementation Hits EU

New FATF regulations, including implementation of the Travel Rule, were given the green light back in July 2019 but have taken many years to come to fruition, leading to the G20 urging quicker implementation in 2020. The EU Parliament seems to have finally got the message and had put together the TFR, which is its own interpretation of the Travel Rule.

As crypto policy expert Patrick Hansen pointed out on Twitter over the weekend, the EU’s implementation actually goes further that the Travel Rule requirements and contains several red flags:

  • Exchanges must “verify the accuracy of information with respect to the originator or beneficiary behind the unhosted wallet” for all such transactions
  • For every crypto transfer from an unhosted wallet over 1k EUR, companies are obliged to inform the “competent AML authorities” of all the details regarding the transfer, regardless of suspicion of criminal activity
  • The threshold for logging of crypto transactions from unhosted wallets could be dropped to 0 EUR
  • Further measures could be put in place after a one-year assessment

Anonymous Crypto Wallet Ban has Council Support

Hansen reports that what is concerning about this vote, which is the first of two as was the case with the MiCA regulation, is that the member states that make up the Council seems to be on the “same page” with the EU Parliament on the issue of anonymous crypto wallets, meaning that it could see a smoother passage through to the next vote, and potentially into law sooner rather than later.

Canada has implemented its own version of the FATF Travel Rules, with users sending to non-Coinbase wallets in Singapore and Japan required to submit personal information on the recipient, such as name and address, from April 1.