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The European Union’s Plans for Cryptocurrency Transactions

Author: Syedur Rahman  31 August 2021

Syed Rahman of Rahman Ravelli outlines the EU’s proposals to improve transparency in cryptocurrency 

The European Union’s package of reforms to tackle financial crime includes measures to make it mandatory to collect details of anyone sending and receiving cryptocurrency.

The new rules proposed by the European Commission include measures to compel cryptocurrency exchanges to retain information about their users.

In a statement, the Commission said: "The aim of this package is to improve the detection of suspicious transactions and activities, and to close loopholes used by criminals to launder illicit proceeds or finance terrorist activities through the financial system." 

The new law would create a new EU-wide anti-money laundering authority (AMLA) by 2023 that would have oversight of cryptocurrencies.

Due Diligence

Although some providers of cryptoasset services are already covered by the EU's existing anti-money laundering and terrorism funding rules, the new measures would extend these rules to all the cryptocurrency sector. 

This would mean that service providers, such as crypto exchanges, would be required to carry out due diligence and know your client checks on everyone that uses them – bringing crypto into line with bank transfers in applying the “Travel Rule’’ so that transactions are traceable. A cryptocurrency service provider would have to take the name, address, date of birth and account number of a customer and the name of the recipient of the transfer.

The new law would ban anonymous cryptoasset wallets –  as anonymous bank accounts already are  – to ensure crypto transactions can be traced.

The Commission has said that the proposals have been designed to find the right balance between addressing the threats and complying with international standards, while not creating excessive regulatory burdens on the cryptocurrency industry.

It added: "These proposals will help the EU cryptoasset industry develop, as it will benefit from an updated, harmonised legal framework across the EU".

EU states and the European Parliament will have to approve the proposals, which could mean they do not become law for two years.

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Syedur Rahman is known for his in-depth experience of serious fraud, white-collar crime and serious crime cases, as well as his expertise in worldwide asset tracing and recovery, international arbitration, civil recovery, cryptocurrency and high-stakes commercial disputes.

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