1/ The EU has reached a deal on the TFR (AML rules).

Yesterday evening, policymakers agreed on the first of the two key EU crypto regulations being currently finalized.

It's not looking great, but could have ended up even worse. A quick overview👇
www.europarl.europa.eu/news/en/press-room/20220627IPR33919/crypto-assets-deal-on-new-rules-to-stop-il...

2/ Recap: Most aspects were already agreed upon prior to yesterday, final negotiations were mainly focused on how to handle transfers from CASPs to/from self-custody wallets.

3/ Overview of the decisions:

• no threshold/exemptions for transfers between CASPs, traceability from the first euro has to be ensured. This is not technologically neutral (tradfi travel rule starts >1k€), but has been expected
• TFR does not apply to P2P transfers

4/ What about transfers between a CASP & a wallet?

• the TFR will apply here, and CASPs will have to collect information and apply "risk-based" AML measures
• but luckily, the verification is only mandatory if the wallet belongs to the CASPs client and the transfer is >1k€

5/ "In case a customer sends or receives more than 1k euros to or from their own un-hosted wallet, the CASP will need to verify whether the un-hosted wallet is effectively owned or controlled by this customer."

I wonder how exactly this verification will look like.

6/
It doesn't sound too good I know, but for long it looked way worse.

For most transfers from/to wallets, there won't be a mandatory verification.

Hence, this key demand ("unhosted wallet verification") from the EU Parliament was quite weakened.
www.coindesk.com/policy/2022/06/29/eu-finalizes-crypto-money-laundering-rules/

7/ Other final agreements?

• transition/implementation period: TFR will apply once MiCA applies, 18 months after entry into force
• review clause: 18 months after entry into application, the Commission will assess the need for more/fewer measures

8/
• sanctions: CASPs need to adopt internal policies & controls to comply with sanctions
• AML blacklist: As expected, no CASP blacklist in the TFR. Instead, there will be a list of non-compliant/abusive CASPs within MiCA

9/
• data protection: CASP have to comply with GDPR, and only transfer information if data protection is ensured

So far the main content of the deal.

Here are two quotes from the two lead negotiators in the EU Parliament that illustrate their overall stance on the matter.

10/ MEP Ernest Urtasun:

"After months of negotiations with the Council, we agreed the most ambitious travel rule for transfers of crypto-assets in the world. We are putting an end to the wild west of unregulated crypto, closing major loopholes in the European AML rules."

11/ MEP Assita Kanko:

"For too long, crypto-assets have been under the radar of our law enforcement (..). Terrorists used crypto for fundraising, to access to child pornography & criminals laundered their proceeds (..) Today, we have taken a big step to address these problems"

12/ So far for now.

With the TFR deal, the first of the two key regulations is almost concluded.

Later this afternoon, the final negotiations on MiCA (comprehensive crypto bill) will take place. A second agreement is expected. I will share an update asap.