Bitcoin in the EU: The EU Parliament now wants to regulate Bitcoin and Co as tightly - Coincierge.de

TOFR rules introduce mandatory KYC rules for crypto asset service providers. According to EU legislators, TOFR will end “the unregulated wild west of cryptocurrencies”.

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Bitcoin in the EU: This is changing

The EU Parliament, Council and Commission reached a provisional agreement on 29 June on the Fund Transfer Regulation (TOFR). The TOFR is part of the regulatory framework being implemented by the EU to regulate cryptocurrencies such as Bitcoin.

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Once implemented, providers of crypto asset services (CASPs) in the EU will have to comply with the rules and adapt their internal policies and procedures accordingly. The rules will enter into force 18 months after the application of the MiCA regulation.

“Regulating the Crypto Wild West”

The TOFR introduces a number of anti-money laundering regulations. They aim to collect data about cryptocurrency transactions.

In a series of tweets On the interim market, EU legislator Ernest Utasun called for the agreement in response to the “unregulated wild west in cryptocurrencies”.

According to him, the TOFR rules apply to any transaction, even if it does not exceed one euro. This includes transactions performed at crypto ATMs.

In addition, the CASPs must collect data on non-hosted wallet transactions. This data includes transactions sent to and received from a non-hosted wallet.

The regulation also specifies that the identity of the owner of the non-hosted wallet must be verified for transactions over € 1,000. These rules on non-host wallets seem to be driven by the notion that they are primarily used by illegal actors to facilitate crime.

Another controversial issue that could lead to these regulations is reports of Russia ‘s use of cryptocurrencies such as Bitcoin or Ethereum to circumvent financial sanctions. As part of these rules, CASPs must carry out their operations in accordance with the economic sanctions imposed by the EU.

However, the rules do not apply to peer-to-peer (P2P) transactions. This means that users who are dissatisfied with the data collection may switch to P2P transactions after applying TOFR rules.

The rules shall also govern the relationship between digital asset providers and CASPs in third world countries, in particular where those providers are unregulated and unlicensed.

EU politician Ondřej Kovařík writes about the rules:

“The provider of crypto assets shall protect the data collected on transactions and make them available to the EU.”

The EU institutions have reached a provisional political agreement on the Funds Transfer Regulation. I believe in striking the right balance of risk mitigation to combat money laundering in the crypto sector without stifling innovation and overburdening businesses. pic.twitter.com/k0P0I3Ah6K
– Ondřej Kovařík (@OKovarikMEP) June 29, 2022

Concerns against TOFR rules

The EU has recently stepped up its efforts to create a regulatory framework for crypto-currency activities. The various institutional crises that have hit the crypto market since 2022 have further reinforced this need.

However, experts and analysts believe that regulatory efforts are an attempt to prevent the use of cryptocurrencies in the EU. Concerns are also expressed that the TOFR rules violate citizens’ right to privacy.

Rather than spur cryptocurrency growth, many believe the regulations will slow the development of blockchain in the EU and stop innovation. Another potential negative impact is that the requirement to collect data on all transactions could make crypto exchange activity unnecessarily slow and costly.

The security of the data collected is also being criticized. Many believe that merging the data with the CASPs and governments could leave them at risk of attack.

The European Agency, the European Commission and the European Banking Authority are some of the EU institutions that have come under attack in the past.

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Text credit: Cryptoslate

Last updated June 30, 2022