March 28, 2022

ECON to vote on mandatory verification of DeFi-wallet users

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ECON to vote on mandatory verification of DeFi-wallet users

On 31 March, the European Parliament's Economic and Monetary Affairs Committee (ECON) will vote on amendments to regulations on exchanging information between counterparties when transferring funds. The proposal would involve collecting data on users of non-custodial cryptocurrency wallets, Unstoppable Finance development manager Patrick Hansen warned.

According to Hansen, the measure aims to implement the FATF "road rule". The latter requires providers of digital asset-related services like exchanges and custodial services to share information about their customers when transferring transactions.

The European Parliament is currently debating the proposed amendments. Hansen stressed that the draft bill published by the body tightens the requirements in terms of data collection and exchange for transactions with non-custodial wallets.

Unlike the original proposal, which only required the collection (but not verification) of personal data for transfers from/to a non-hosted wallet, the draft requires 'verification of accurate information regarding the originator and beneficiary behind the non-hosted wallet', he wrote.

The specialist explained that providers of digital asset-related services cannot physically verify a non-hosted counterparty. In his view, the bill in its current form would force cryptocurrency companies to forego transactions with such services for regulatory compliance.

The draft bill also foresees the possibility of introducing “additional special measures to mitigate the risks associated with transfers from/to non-hosted wallets, including the introduction of potential restrictions” a year after the legislation comes into force.

This means that the European Commission could ban transactions in favour of non-hosted wallets altogether, which was already proposed by some Members of Parliament in a previous draft, Hansen explained.

Among other things, the document proposes sharing information about all cryptocurrency transactions, regardless of their volume. At the same time, there is a minimum threshold of €1000 for fiat currency.

In order to facilitate the detection of linked transfers and prevent the misuse of digital assets to facilitate, finance and conceal criminal activities and launder proceeds, no de minimis threshold should be set for cryptocurrency transactions, the draft states.

If approved by ECON, the bill would go before the European Commission and Council. The document could be substantially amended before final adoption.

Jack Evans

About the author

I became a crypto asset owner in 2014, when the industry was in its infancy. Before that, I was working in the classic US and European stock markets. Since then, I have gained extensive experience in both cryptocurrency investing and day trading. I am happy to share with readers my experience with crypto exchanges, DeFi and NFT instruments. 

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