Friday, June 21, 2024
spot_imgspot_img
HomeTechnologyCrypto-assets: new EU rules to trace transfers, prevent money laundering and protect...

Crypto-assets: new EU rules to trace transfers, prevent money laundering and protect customers

The European Parliament approved the first European Union (EU) rules to track Crypto-assets transfers, prevent money laundering and implement common standards for supervision and customer protection.

With 529 votes in favour, 29 against and 14 abstentions, the new law seeks to ensure that cryptographic transfers, like any other financial transaction, can be tracked and suspicious transactions blocked. This groundbreaking legislation aims to increase transparency and accountability in the cryptocurrency sector, addressing long-standing concerns about the anonymity and opacity of digital currencies.

The new rules, provisionally agreed by Parliament and Council negotiators in June 2022, will apply the so-called ‘travel rule’, already used in traditional finance, to crypto-asset transfers.

This means that information on the source of the asset and its beneficiary must ‘travel’ with the transaction and be stored on both sides of the transfer, making it easier to trace suspicious activity.

The law also covers transactions exceeding €1,000 from self-hosted wallets, crypto-asset wallet addresses of private users, when interacting with wallets hosted and managed by crypto-asset service providers. The rules, however, do not apply to person-to-person transfers made without a provider or between providers acting on their own behalf.

The European Parliament also gave the final green light, with 517 votes in favour, to new common rules on the supervision, consumer protection and environmental protection of crypto-assets, including cryptocurrencies (MiCA). The bill, informally agreed with the Council in June 2022, includes safeguards against market manipulation and financial crime.

The impact of MICA on crypto-assets

MiCA will cover crypto-assets that are not regulated by existing financial services legislation. Key provisions for those issuing and trading crypto-assets, including asset reference tokens and e-money tokens, cover transparency, disclosure, authorisation and supervision of transactions. Consumers will be better informed about the risks, costs and burdens associated with their transactions. Furthermore, the new legal framework will support market integrity and financial stability by regulating public offers of crypto assets.

The agreed text also includes measures against market manipulation and to prevent money laundering, terrorist financing and other criminal activities. To counter money laundering risks, the European Securities and Markets Authority (ESMA) should establish a public register for non-compliant cryptocurrency service providers operating in the EU without authorisation. Also to reduce the high carbon footprint that cryptocurrencies generate, major service providers will have to declare their energy consumption.

According to Stefan Berger, lead MEP for MiCA, this law puts the EU at the forefront of the token economy with 10,000 different crypto-assets. Consumers will be protected from deception and fraud and the industry, which was damaged by the FTX collapse, will be able to regain confidence.

Consumers will have all the information they need and all underlying risks related to crypto-assets will have to be monitored. The European crypto-asset industry today has regulatory clarity that does not exist in countries like the US.

Ernest Urtasun, co-rapporteur of the Committee on Economic and Monetary Affairs on crypto-asset transfers, emphasised that illicit crypto-asset flows are currently moving rapidly around the world, with a high probability of never being detected.

These regulations will oblige crypto-asset service providers to detect and stop criminal cryptocurrency flows, and all categories of cryptocurrencies will be subject to the full set of anti-money laundering obligations.

These procedures will fill a serious gap in the European anti-money laundering framework and implement the most ambitious rule legislation in the world so far, in full compliance with international standards.

Meanwhile, Assita Kanko, co-rapporteur for the Committee on Civil Liberties, Justice and Home Affairs, said that Parliament and the Council have found a fair compromise that will make it safer for citizens to hold and trade crypto assets. Although there will be some administrative burdens for cryptocurrencies and startuppers, the new legislation will unify the currently fragmented European market that has 27 regulatory regimes, which should offset any costs.

EU rules on crypto-assets: a significant step forward for regulation, but concerns remain

All together, these new EU rules on the tracking of crypto-assets transfers, the prevention of money laundering and the implementation of common standards of supervision and customer protection represent a significant step forward for the regulation of the digital currency industry.

With the growing popularity of crypto-assets and the increasing number of transactions involving these digital currencies, there is a pressing need to ensure that the industry is transparent, accountable and safe for investors and consumers.

Moreover, the implementation of these rules is likely to have far-reaching consequences outside Europe, as other countries and jurisdictions may also adopt similar measures to regulate the cryptocurrency sector. This would contribute to a more harmonised and coordinated approach to the regulation of digital currencies globally.

However, while these new rules are undoubtedly a positive development for the cryptocurrency industry, there are still some concerns that need to be addressed. For example, there are concerns about the potential impact on innovation and competition in the industry, as well as the potential for unintended consequences, such as pushing clandestine transactions or pushing users towards less regulated alternative platforms.

To mitigate these concerns, it is essential that policymakers engage in an ongoing dialogue with stakeholders in the cryptocurrency sector to ensure that regulations are proportionate, effective and reflect the needs and realities of the sector. Furthermore, it is important to maintain a flexible and adaptable approach to regulation that can evolve in line with technological advances and changing market conditions.

The approval of these first EU rules to track cryptocurrency transfers, prevent money laundering and implement common standards of supervision and customer protection represents a significant milestone for the regulation of the digital currency industry.

Although there are still some concerns that need to be addressed, these regulations represent an important step forward in ensuring that the industry is transparent, accountable and safe for investors and consumers.

With the growing popularity of crypto-assets and the increasing number of transactions involving these digital currencies, it is critical that policymakers continue to engage in ongoing dialogue with industry stakeholders to ensure that the rules are proportionate, effective and reflect the needs and realities of the industry.

DISCLAIMER

This article provides general information only and does not replace professional advice in any way. It is recommended to consult a qualified professional before making any important decisions regarding financial, legal or other matters. The author and the publication are not responsible for any errors or damages caused by the use of the information contained in this article.

We are memberspot_img
spot_img

Related articles

Discover innovation at Digital Conference Malta 2024

Join industry leaders on June 25, 2024, at the Digital Conference Malta 2024 for discussions on digital economy, AI, fintech, and green technology, driving Malta's digital transformation.

Malta and Artificial Intelligence: a global vision in a changing world

Discover how Malta is shaping the future of Artificial Intelligence, as Europe moves closer to adopting the AI Act regulation and the world signs the 'Bletchley Declaration'

Digital Platforms: DAC7, new rules for reporting economic activities.

New DAC7 rules for reporting digital platforms. Increased tax transparency and reporting obligations for operators and sellers.

Funding focus
Discover the news in the dedicated section