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Article European Union: Amendment to EU Wire Transfer Regulation Ensures Traceability of Crypto Asset Transfers

On June 29, 2023, an amendment to the European Union (EU) Wire Transfer Regulation entered into force. It will apply from December 30, 2024. (Amendment art. 40.) The goal of the amendment is to prevent money laundering and terrorism financing by imposing enhanced customer due diligence requirements on crypto asset transfers conducted by crypto asset service providers (CASPs) established in the EU. (Art. 1.)

The European Banking Authority (EBA) will publish guidelines that will specify the implementation and technical aspects of certain provisions of the amendment, in particular how the risk factors listed in the EU Wire Transfer Regulation are to be taken into account by CASPs. (Arts. 23, 25, para. 4; arts. 36, 38.)

Content of the Amendment

The amendment expands the duties imposed on payment service providers under the EU Wire Transfer Regulation to transfers of crypto assets if at least one CASP is involved in the transfer. It includes transfers linked to crypto-ATMs. (Art. 2, para. 1.) Private person-to-person transfers without the involvement of regulated CASPs are not covered, among other cases. (Art. 2, para. 4.) The obligations apply regardless of the value of the crypto assets being transacted, meaning there are no exemptions for low-value transactions. (Recitals 27, 30.)

Transfers of crypto assets are defined as “transaction[s] with the aim of moving crypto-assets from one distributed ledger address, crypto-asset account or other device allowing the storage of crypto-assets to another, carried out by at least one crypto-asset service provider acting on behalf of either an originator or a beneficiary, irrespective of whether the originator and the beneficiary are the same person and irrespective of whether the crypto-asset service provider of the originator and that of the beneficiary are one and the same.” (Art. 3(10).)

The CASP of the originator must include and verify the following information on the originator with the transfer:

  • name;
  • distributed ledger address, if transfer is registered on a DLT or similar network, and the crypto asset account number, if one exists and was used for the transaction; or
  • crypto asset account number in cases where there is no registration on a network;
  • address, official personal document number, and customer identification number or date and place of birth; and
  • current legal entity identifier (LEI) or equivalent official identifier. (Art. 14, paras. 1, 6, 7.)

With regard to the beneficiary, the CASP of the originator must provide the same information with the exception of the address and official personal document number, and customer identification number or date and place of birth of the beneficiary. (Art. 14, para. 2.)

The CASP of the beneficiary must ensure that appropriate procedures are in place to monitor and detect whether necessary information is missing and verify the accuracy of the information before making the crypto assets available to the beneficiary. (Art. 16.)

The FATF’s Travel Rule

The amendment aims to introduce in EU law the Financial Action Task Force (FATF) Recommendation No. 16 on wire transfers, commonly known as the “travel rule,” and to ensure a coherent implementation in all EU member states. (Amendment, recital 6; COM(2021) 422 final, at 3 & 9.) With regard to new technologies, the FATF advises that Recommendation No. 16 be extended to virtual asset transfers. (FATF Recommendations, at 77, Interpretative Note to Recommendation No. 15, point 7(b).)

National Crypto Asset Transfer Ordinances

Some EU Member States, such as Germany or Portugal, had enacted their own national crypto asset transfer ordinances while the EU legislative process was still ongoing. As an example, the German government considered it necessary because “the risks of anonymous crypto asset transfers are too high to wait for the amendment of the European regulation.” (Explanatory memorandum, at 3, no. III.) However, the German Crypto Asset Transfer Ordinance (Kryptowertetransferverordnung, KryptoWTransferV) provides that it will be automatically repealed once the amended EU Wire Transfer Regulation begins to apply. (KryptoWTransferV, § 7, para. 2.)

Jenny Gesley, Law Library of Congress
June 30, 2023

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Chicago citation style:

Gesley, Jenny. European Union: Amendment to EU Wire Transfer Regulation Ensures Traceability of Crypto Asset Transfers. 2023. Web Page. https://www.loc.gov/item/global-legal-monitor/2023-06-29/european-union-amendment-to-eu-wire-transfer-regulation-ensures-traceability-of-crypto-asset-transfers/.

APA citation style:

Gesley, J. (2023) European Union: Amendment to EU Wire Transfer Regulation Ensures Traceability of Crypto Asset Transfers. [Web Page] Retrieved from the Library of Congress, https://www.loc.gov/item/global-legal-monitor/2023-06-29/european-union-amendment-to-eu-wire-transfer-regulation-ensures-traceability-of-crypto-asset-transfers/.

MLA citation style:

Gesley, Jenny. European Union: Amendment to EU Wire Transfer Regulation Ensures Traceability of Crypto Asset Transfers. 2023. Web Page. Retrieved from the Library of Congress, <www.loc.gov/item/global-legal-monitor/2023-06-29/european-union-amendment-to-eu-wire-transfer-regulation-ensures-traceability-of-crypto-asset-transfers/>.