EU moves further in its crypto regulation

EU moves further in its crypto regulation

EU moves further in its crypto regulation

The EU Parliament, Council, and Tripartite Commission reached a provisional agreement in June 29 on the Transfer of Funds Regulation (TOFR). The TOFR constitutes a part of the regulatory frameworks the EU is setting up for cryptocurrency regulation.

Upon implementation, crypto-assets service providers (CASPs) in the EU will be obliged to comply with the rules and adjust their internal policies and procedures accordingly.

The rules will become effective 18 months after the MiCA regulation is applied.

Regulating the crypto wild west

The TOFR introduces several anti-money laundering rules that seek to collect data on cryptocurrency transactions.

In a series of tweet on the provisional agreement, Ernest Utasun, an EU lawmaker, branded the agreement an answer to the “unregulated crypto wild west.”

According to him, the TOFR rules apply to every transaction, even if it’s not more than a Euro. Including transactions carried out at crypto ATMs. In addition, CASPs will have to collect data on unhosted wallet transactions. This data includes transactions made to and received from unhosted wallets.

The rule further requires that the identities of unhosted wallets owner are verified on transactions above 1000€. These rules on unhosted wallets seem informed by thoughts that illicit actors primarily use them to facilitate crimes.

Another potential topic of contention that could have led to these regulations are the reports on Russia leveraging cryptocurrencies to avoid financial sanctions. Given that as part of these rules, CASPs must bring their operations in conformity with economic sanctions imposed by the EU

However, the rules do not apply to peer-to-peer (P2P) transactions. Meaning that upon implementing the TOFR rules, users uncomfortable with the data collection could migrate to P2P transactions.

The rules will also regulate digital asset providers’ relationships with CASPs in third-world countries, especially where these providers are unregulated and unlicensed.

Speaking on the rules, EU policymaker Ondrej Kovarik tweeted:

The crypto asset provider will safeguard the data collected on transactions and make them available to the EU

Concerns about the TOFR rules

The EU has recently increased its effort to implement regulatory frameworks for cryptocurrency activities. The several institutional crises recorded in the crypto market since 2022 have further intensified this need.

However, experts and analysts consider the regulatory attempts a move to stifle cryptocurrency use in the EU The concerns also echo that the TOFR rules constitute a breach of citizens’ right to privacy.

Rather than aid the growth of cryptocurrency, many believe the regulations will delay blockchain development in the EU and stifle innovation. Another potential negative impact lies in the requirement to collect data on all transactions could make crypto exchange activities unnecessarily slow and expensive.

Likewise, the security of the data collected has come under criticism. Many opine that pooling the data with CASPs and the governments could make them vulnerable to attacks.

The European Agency, the European Commission, and European Banking Authority are some of the EU institutions that have suffered attacks in the past.

//platform.twitter.com/widgets.js

credit source

EU moves further in its crypto regulation

#moves #crypto #regulation

if you want to read this article from the original credit source of the article then you can read from here