January 29, 2023

The European Parliament will vote for the mandatory verification of all users of DeFi wallets

On March 31, the Committee on Economic and Monetary Affairs of the European Parliament (ECON) will vote on amendments to rules for the exchange of information between counterpartieswhen transferring funds. The proposal involves the collection of data on users of non-custodial cryptocurrency wallets, warned Unstoppable Finance development manager Patrick Hansen.

According to Hansen, the measure aims to implementFATF road rules. The latter obliges digital asset service providers such as exchanges and custodial services to share information about their customers when transmitting transactions.

The European Parliament is currently discussingproposed amendments. Hansen stressed that the draft bill published by the body tightens the requirements for collecting and exchanging data when conducting transactions with non-custodial wallets.

"Contrary to the original proposal,which only required the collection (but not verification) of personal data when transferring from / to a non-hosted wallet, the project requires “to verify the accuracy of information regarding the initiator and beneficiary behind the non-hosted wallet,” he wrote.

The specialist explained that suppliers of relateddigital assets of services cannot physically verify a non-custodial counterparty. In his opinion, the bill in its current form will force cryptocurrency companies to refuse transactions with such services in order to comply with regulatory requirements.

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

“This means that the European Commission can completely ban transactions in favor of non-hosted wallets, which was already proposed by some MPs in a previous draft,” Hansen explained.

Among other things, the document involves the exchange of information about all cryptocurrency transactions, regardless of their volume. At the same time, there is a minimum threshold of €1,000 for fiat currency.

“In order to facilitate the identification of related transfersand preventing the misuse of digital assets to facilitate, finance and conceal criminal activities and money laundering, a de minimis threshold should not be set for transactions with cryptocurrencies,” the project says.

If approved by ECON, the bill will be submitted to the European Commission and the Council of the EU. Significant changes may be made to the document before final adoption.