- Fake news circulated last week claiming the EU had banned crypto-crypto transactions over €3,000
- The truth remains unchanged from when the EU initially proposed extending traditional financial regulations to crypto transactions
- Only transactions involving fiat currencies or those involving third-party hosted wallets are affected
Fake news was doing the rounds last week that the European Union (EU) has banned crypto-crypto transactions over €3,000 in value between non-custodial wallets. The truth, however, is the same as it was when the EU first considered extending traditional financial regulations relating to cryptocurrency transactions: only transactions involving exchanges or wallets hosted by a third party are affected. The fear-mongering developed following an EU meeting in which certain elements of the new provisions were amended ahead of wider implementation, leading to some misunderstanding the impact of those changes.
€1,000 Rule Scrapped for Non-custodial Wallets
The issue over monitoring of crypto payments began in 2019 when EU regulators first mooted the idea of implementing certain traditional financial rules within the crypto sector. This led to a proposed ban on non-custodial or self-hosted crypto wallets in 2021, but this was abandoned last year due to its impact on innovation.
There was, instead, a €1,000 transaction threshold implemented on transfers from self-hosted wallets to custodial (third party) wallets before identity verification was required, but this was debated at a meeting between the European Union’s Economic and Monetary Affairs Committee and the Civil Liberties, Justice and Home Affairs Committee, where a majority of the European Parliament’s lead committees scrapped the limit from self-hosted crypto wallets as part of new anti-money laundering laws.
The same isn’t true for crypto exchanges operating as crypto asset service providers (CASPs) in the EU, which must conduct identity verification checks, known as “customer due diligence,” for users engaging in transactions exceeding €1,000. These checks are aimed at preventing anonymous transactions and ensuring transparency in crypto-related activities.
Furthermore, the regulations explicitly prohibit CASPs from providing accounts to anonymous users or facilitating transactions involving privacy coins like Monero (XMR), which are designed to conceal transaction details, with the member countries aiming to enhance transparency and accountability within the crypto industry and mitigate the risks associated with illicit activities such as money laundering and terrorist financing.
CASPs Must Take “Mitigating Measures”
In addition to identity verification measures, CASPs are also required to implement “mitigating measures” for transfers between their platform and self-custody wallets, where users control their private keys. These measures may include verifying the identity of exchange wallet holders involved in transactions with self-custody wallets, ensuring that funds are traced and accounted for effectively.
Moreover, the legislation imposes limits on cash payments, with EU member states empowered to establish lower thresholds based on their discretion. Anonymous cash payments above specified amounts beginning at €3,000, are strictly prohibited to prevent potential misuse of cash transactions for illicit purposes. This was mistaken by some as being an attempt to thwart transactions between non-custodial crypto wallets, but these fears were tackled by those with knowledge of the regulations:
1/ Story of a Fake News ❌
Many of you have seen the “information” circulating in the last 48 hours suggesting that the EU voted to ban “anonymous” transactions via “self-custody” wallets
Except that’s not the case at all. Explanations 👇 pic.twitter.com/gyP1xWT9pV
— Raphaël Bloch 🐳 (@Raph_Bloch) March 24, 2024
The Anti-Money Laundering Regulation (AMLR) is expected to be fully operational within the next three years, pending approval from both the EU Council and the European Parliament plenary.
The approval process is slated to occur during the next parliamentary session scheduled for April 10, marking a significant step toward strengthening regulatory oversight and combating financial crimes in the cryptocurrency ecosystem.
