Paul Tang, a member of the E.U. Parliament, believes that transferring cryptocurrencies should require information about the sender and the receiver, just like bank transfers.
Tang, who heads the E.U. Parliament’s Subcommittee on Tax Matters, called the pushback against the upcoming crypto AML regulation “another social media storm by crypto bros.”
A new E.U. proposal means a new battle for the crypto industry
The crypto industry in Europe is set to fight yet another battle in its war against stifling regulation. This time, the fight is aimed against the European Commission and its latest proposal to extend AML requirements for cryptocurrency wallets.
The revision of the Transfer of Funds Regulation (TFR), first proposed in July 2021, will extend the obligation of financial institutions in the E.U. to accompany transfers of funds with information about who is sending and who is receiving the transaction. The proposal itself represents the practical implementation of the existing FATF travel rule that requires crypto service providers to KYC their customers and is set to be amended in a vote on Thursday, March 31st.
However, a last-minute draft introduced a provision requiring crypto service providers in the E.U. to verify the identities of users sending or receiving funds through unhosted wallets.
As the bill provides no guidance as to how a crypto service should verify unhosted wallets, this will mean that many will decide to forego transacting with them altogether. Those that continue transacting with unhosted wallets will be required to report all transactions over €1,000.
This caused a stir in the crypto community, with many calling this a blatant violation of privacy. Those backing the bill, however, seem undeterred by this.
Paul Tang, a member of the E.U. Parliament serving as the chair of its Subcommittee on Tax Matters, called the public outcry “another social media storm by crypto bros.”
“Just like bank transfers, transferring crypto like Bitcoin should be accompanied with information about the person sending and receiving the funds,” he wrote on Twitter earlier today.
Tang compared holding cryptocurrencies to holding cash, saying they’re both stored without the involvement and knowledge of anyone else—including the government. But, unlike cash, cryptocurrencies are extremely mobile and operate in a borderless world, which increases the likelihood they’ll end up “in the wrong place,” he explained.
“So the identity of unhosted wallet-holders needs identification—just like you need to identify yourself when you deposit money at the bank. And we want authorities to be notified in case any one person receives a total of €1,000 from unhosted wallets. That is a red flag.”
He said that the threshold of €1,000 in total is an attempt to disable “smurfing” when tracking crypto transactions. Smurfing refers to the act of sending transfers smaller than the limit required by AML regulation, which usually stands at around $10,000. The varying price of cryptocurrencies means that thresholds like these are hard to enforce, which is why the E.U. believes it would be more productive to cover basically all crypto transfers.
Tang says that despite what members of the crypto industry say, these are important tools to fight money laundering and terrorist financing.
These are important tools to fight money laundering/terrorist financing. Some crypto-lobbyists won’t like the extra work. But being a part of our society comes with obligations. Banks already fight criminal money. Crypto-bro’s should set up to the plate and do so too. end/
— Paul Tang (@paultang) March 28, 2022
However, the future of the crypto industry in the E.U. might not become as bleak as Tang wants it to. Previous attempts to introduce regulation as stifling as this one was rejected by the E.U. parliament and there’s a high likelihood we could see this happening again. Despite their push to assert more control over the crypto market, neither the European Parliament nor the European Commission wants to pass laws that most literally can’t be practically implemented.
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