FameEX Hot Topics | New Regulations by EU on Cryptocurrency Transactions: Self-Hosted Wallets to Follow Rules for Transfers Over €1000

The European Parliament has approved the first-ever EU legislation for tracking crypto-asset transfers, a significant development that aims to deter money laundering while establishing standard supervision and consumer protection guidelines. Under the new legislation, crypto transfers will now be subject to the “travel rule,” which is already applicable in traditional finance. The travel rule mandates that transaction information, including the source and recipient of the asset, be documented and stored on both ends of the transfer. This regulation will apply to transactions over €1000 involving self-hosted wallets when interacting with hosted wallets overseen by crypto-asset service providers. However, the new rules will not apply to transfers between individuals without a provider or among providers acting independently.

The MiCA framework, approved by the Parliament in June 2022, will cover crypto-assets that are not currently regulated by existing financial services laws. Key provisions target transparency, disclosure, authorization, and supervision of transactions for those issuing and trading crypto-assets. The aim is to better inform consumers about potential risks, costs, and charges associated with their transactions. The new legal framework is also designed to enhance market integrity and financial stability by regulating public offers of crypto-assets.

The legislation includes specific measures to combat money laundering and other illicit or criminal activities. The European Securities and Markets Authority (ESMA) will be responsible for creating a public register of non-compliant crypto-asset service providers operating within the EU without proper authorization. Additionally, major service providers must disclose their energy consumption to address the “high carbon footprint” of cryptocurrencies. The new rules are part of the EU’s broader efforts to reduce carbon emissions and achieve climate targets.

Stefan Berger, the lead MEP for the MiCA regulation, said that the legislation places the EU at the forefront of the token economy, providing regulatory clarity for the European crypto-asset industry. Co-rapporteurs Ernest Urtasun and Assita Kanko emphasized the significance of this legislation in addressing loopholes in the EU’s AML framework and unifying the fragmented European market.

The legislation will now proceed to the Council for formal endorsement before being published in the EU Official Journal and entering into force 20 days later. The implementation of these regulations will lead to increased transparency and accountability in the crypto industry, while also providing more protection for consumers and deterring financial crimes. The EU's approach to regulating the crypto-asset market is likely to serve as a model for other jurisdictions around the world.

Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.