European Parliament Committees Endorse Ban on Anonymous Crypto Transactions

The European Parliament’s EP Committee on Economic and Monetary Affairs and the Committee on Civil Liberties, Justice and Home Affairs have approved the Anti-Money Laundering Regulation, which also addresses cryptocurrency payments.

The previous version set a €1000 limit for non-custodial wallet owners, below which they could send transactions to crypto asset service providers (CASP). In the current version, this limit has been removed—CASP must conduct checks “when making a single payment of less than €1000.”

“Crypto asset service providers must apply mitigation measures commensurate with the identified risks. These measures should include one or more of the following: taking steps to identify and verify the identity of the sender or recipient of a transfer made from or to a non-custodial address […]”, the document states.

The list also includes the requirement for additional information on the origin and purpose of crypto assets, enhanced monitoring of these transactions, and “any other measures to reduce the risks of money laundering and terrorist financing.”

Additionally, the document prohibits cash payments over €10,000 and anonymous cash payments over €3,000.

European Parliament member Patrick Breyer questioned the effectiveness of the bans in combating money laundering.

EU Committee approves:
?Prohibition of cash payments over €10,000
?Prohibition of anonymous cash payments over €3,000
₿ Prohibition of anonymous crypto payments to hosted wallets without any threshold

This means war on cash and gradual erosion of our financial freedom!… pic.twitter.com/gwznD4QZop

— Patrick Breyer #JoinMastodon (@echo_pbreyer) March 21, 2024

“The ban on anonymous payments will at best have minimal impact on criminals but will deprive innocent citizens of financial freedom. The medicines or sex toys I buy are my personal business. Dissidents […] increasingly rely on anonymous donations in virtual currencies worldwide,” Breyer stated.

In his view, the EU’s war on cash “will have unpleasant consequences”: risks of negative interest rates and banks cutting off money supply at any time.

“Dependence on banks is growing at an alarming rate. The deprivation of financial rights must be stopped. We need to think about how we can bring the best attributes of cash into the digital future. We have the right to pay and donate online without our personal transactions being registered. If the EU thinks it can regulate virtual currencies at a regional level, then it has not understood the global nature of the internet,” Breyer stated.

According to Cointelegraph, the new legislation will come into effect in three years—after it receives approval from the EU Council and the EP.

Former Binance director for Asia and Eastern Europe Gleb Kostarev called the European Parliament’s decision “a huge step towards restricting the freedoms of cryptocurrency users.”

“What the industry will look like in the future: every wallet, every account will have KYC. And if there’s no KYC—you’re outside the law,” he added.

According to Kostarev, service providers in the EU will be required to identify the client before opening a crypto wallet for them. He also anticipates the widespread adoption of the so-called “Travel Rule” by European exchanges from the FATF.

“The days when you could withdraw crypto to any wallet will be a thing of the past. At a minimum, you will have to specify who owns the wallet. When withdrawing money from an exchange, you may be told: you can transfer to this wallet, but not to that one. And then they will additionally ask for the reason for the transfer,” Kostarev explained.

Ultimately, he believes withdrawals from centralized exchanges will only be allowed to similarly regulated platforms within the EU.

Circle’s Director of Strategy and Regulatory Policy in Europe, Patrick Hansen, noted that the law does not ban non-custodial wallets and payments using them, as well as P2P transactions and hardware wallets.

I will have more to say on this the next few days and I am not a fan of the AMLR, but don’t believe the FUD that is being shared.

Self custody wallets are not banned. Payments to/from self custody wallets are not banned. P2P transfers are explicitly excluded from AMLR, as are… https://t.co/U2p3tg3ZJ4

— Patrick Hansen (@paddi_hansen) March 23, 2024

Earlier, European Parliament members approved prison terms for circumventing sanctions using cryptocurrencies. The document awaits approval by the EU Council.

By mid-2025, a new regulatory body for anti-money laundering, the AMLA, will begin operations in the EU. Its headquarters will be located in Frankfurt, with a team of over 400 employees.

For more on cryptocurrency regulation in Europe, read ForkLog’s cards: