MEPs lead EU push for strict crypto rules to stop illicit cash flows

An absence of rules for tracing transfers of crypto-assets like Bitcoin and electronic money tokens is making the technology attractive for criminals.

MEPs from the Committee on Economic and Monetary Affairs (ECON) and the Committee on Civil Liberties (LIBE) have now adopted a position for a law that can strengthen the EU’s rules against money laundering and terrorist financing.

“Illicit flows in crypto-assets move largely undetected across Europe and the world, which makes them an ideal instrument for ensuring anonymity,” Ernest Urtasun (Greens), co-rapporteur for ECON committee said.

“As illustrated by all the recent money-laundering scandals, from the Panama Papers to the Pandora Papers, criminals thrive where rules allowing for confidentiality allow for secrecy and anonymity. With this proposal for a regulation, the EU will close this loophole.”

Based on the new rules agreed by MEPs, all transfers of crypto-assets will have to include information on the source of the asset and its beneficiary, information that is to be made available to the competent authorities.

The rules would also cover transactions from so-called unhosted wallets, that is a crypto-asset wallet address that is in the custody of a private user. Technological solutions should ensure that these asset transfers can be individually identified.

The main aim is to ensure that crypto transfers can be traced and suspicious transactions blocked. The rules would not apply to person-to-person transfers conducted without a provider, such as bitcoins trading platforms, or among providers acting on their own behalf.

“We should be facilitating the use of crypto-assets by people of good will safely and correctly, as well as protecting against the use of crypto-assets for terrorist financing, extortion, child sexual abuse material or money laundering,” co-rapporteur for LIBE Assita Kanko (ECR) said.

“But we also seek to normalise the crypto world as it grows, implementing rules that create trust. More than a decade after the creation of Bitcoin, it is high time we took these important steps for our citizens.”

Due to their inherently rapid and virtual nature, crypto-asset transactions easily circumvent existing rules based on transaction thresholds. MEPs decided therefore to remove minimum thresholds and exemptions for low-value transfers.

 MEPs also want the European Banking Authority (EBA) to create a public register of businesses and services involved in crypto-assets that may have a high risk of money-laundering, terrorist financing and other criminal activities, including a non-exhaustive list of non-compliant providers.

Before making the crypto-assets available to beneficiaries, providers would have to verify that the source of the asset is not subject to restrictive measures and that there are no risks of money laundering or terrorism financing.

The new rules are part of a new anti-money laundering package, which sets out measures to strengthen the EU rules on combating money laundering and terrorist financing. It seeks to address the shortcomings of the existing framework, which include ineffective implementation, weak oversight and insufficient detection of suspicious transactions.

The adopted text represents the draft mandate for MEPs to negotiate the final shape of the legislation with EU governments.