EU wants to collect personal data in crypto transactions
Two months after the German finance minister, the EU Commission has also presented a new package of rules to regulate the transfer of crypto values. This largely corresponds to the planned German statutory ordinance.
Like the German Kryptowerte-Transferverordnung (KryptoTransferV), the EU regulation essentially deals with crypto service providers. When buying and selling crypto assets, they should collect the data of the people involved, keep them and transmit them to an authority on request.
Contents
The EU wants to set up the corresponding authority – unlike the German Finance Minister Olaf Scholz (SPD). It should be operational from 2023, deal with the fight against money laundering in general and also deal with the trading of cryptocurrencies.
The reason is known. The EU Commission claims, in line with most governments worldwide, that the new regulations are intended to prevent the misuse of cryptocurrencies for money laundering and terrorist financing purposes. The core of the legislative initiative is so-called “increased due diligence for crypto service providers”.
Crypto regulations are said to be necessary to fight crime
In the future, they should transmit information about the client and beneficiary in all transactions, i.e. store the sender and recipient of an asset in an identifiable manner. According to the expectations of the politicians, this creates transparent traceability, which should take into account the state’s interests in the fight against crime.
The new rules are intended to undermine the principle of pseudonymity in blockchain transactions. Instead of a cryptic address, the owner of which would first have to be determined (but could also be determined), authorities would have direct access to the names and addresses of the people involved in a specific crypto transaction. Ultimately, the EU Commission is implementing the requirements of the Money Transfer Ordinance applicable to money transfers accordingly. Just as there are no anonymous bank accounts, there should also be no anonymous crypto accounts according to the will of politics.
The FATF’s recommendations are once again the basis for regulation
In terms of content, the EU Commission is based closely on the recommendations of the FATF on the so-called travel rule, which provides for the names of sender and recipient in financial transactions. The Financial Action Task Force (FATF) is an international organization of the OECD that prepares recommendations for its member states on effective regulation of money laundering and terrorism prevention. It is seen as the driver of the global fight against money laundering. Your proposals have always found fertile ground, especially in the bodies of the European Union.
It can therefore be assumed with some probability that the EU regulations will become applicable law. For the time being, however, it is a matter of an initiative by the Commission that must now be introduced into the parliamentary process. The entry into force is not expected for two years at the earliest. This temporal perspective makes the entry into force of the German KryptoTransferV more likely. All she needs is the finance minister’s signature.
Critics see no point in the regulatory package
Critics of this bundle of regulations from the federal government and the EU point out that although cryptocurrencies may play a role in terrorist financing, drug deals or extortion such as the more common ransomware attacks – but not with the participation of companies such as Coinbase, Binance, Bitpanda or other crypto custodians . KYC rules already apply to them, which allow the parties involved in a transaction to be identified.
If cryptocurrencies were used in a criminal context, it would always be in the form of the unhosted wallet. It lives on the hardware of the transmitter and the receiver. Neither the sender nor the recipient are recorded by the control system and could happily continue to send pseudonymized assets back and forth. In this respect, the statutory ordinances would not be able to achieve the stated aim at all. Rather, they are specifically aimed at the disadvantage of the business models of the crypto service providers and are only promoted with straw man arguments. However, there is also a proposal in the EU draft that would mean banning anonymous wallets. The question remains how such a ban should be enforced.
