#MiCA was not the only proposal completed last week, as 🇪🇺 institutions also finalised the Transfers-of-Funds Regulation (TFR).

The #TFR is meant to implement the @FATFWatch's #travelrule for transfers of #cryptoassets in the EU.

As always, check our 🧵for details:

1/18
First, a bit of #context:

The original Transfers-of-Funds Regulation was established in 2015 and introduced the requirement for financial institutions to accompany each #transfer of funds with verified information about the originator and beneficiary of the transfer.

2/18
As part of its 2020 Action Plan on preventing #moneylaundering and #terrorism financing, the @EU_Commission put forward a legislative proposal for a recast of the original #TFR text with the main objective of expanding traceability requirements to crypto-assets.

3/18
This was also a reaction to the @FATFWatch's updated "Recommendation 16" on Wire Transfers and "Recommendation 15" on Virtual Assets, which required jurisdictions to update their AML/CTF laws to implement the #travelrule on transfers of #cryptoassets.

4/18
The @FATFWatch recommendations stated that regulated entities should be required to collect & verify the information of originators & beneficiaries of #cryptoassets transfers between two regulated entities, so between two Crypto-Assets-Service-Providers (#CASPs).

5/18
However, they also clarified that this info should NOT be #verified for #cryptoassets transactions between a regulated entity (a #CASP) and a non-regulated entity (a self-hosted #wallet), meaning these requirements should be imposed only with respect to their own customer.

6/18
In the 🇪🇺, the discussion on the implementation of the FATF #travelrule showed a strong divide between the co-legislators on how to approach self-hosted wallets, initially referred to as '#unhosted wallets'.

While the @EUCouncil mostly sticked to the FAFT approach...

7/18
... the @Europarl_EN pushed strongly for the introduction of #verification requirements for ❗ALL transfers❗ with self-hosted wallets, which would have forced #CASPs to somehow verify the information provided by their user who wished to transact with a #selfhostedwallet.

8/18
Thanks also to the engagement with 🇪🇺 institutions, which highlighted the consequences this would have had for the key role self-hosted wallets play to access #Web3, the negotiations ended with an agreement that better reflects the #riskbased approach of the @FATFWatch.

9/18
🔷 Main highlights of the #TFR 🔷

▶️Scope

-All CASPs (as defined by #MiCA) become obliged entities.

-#CryptoATMs are in scope.

-P2P transfers are out!

-Only transfers where a #CASP is involved are in scope.

-#NFTs are not subject to the #travelrule.

10/18
▶️Transfer of assets between #CASPs

- #TravelRule applies to ALL transactions between #CASPs.

- CASPs to collect & store info on the originator & beneficiary of transfers, transmitted in #GDPR-compliant way.

-Verification only part of own #customerduediligence process

11/18
▶️Transfer between #CASPs and user's own self-hosted #wallet

-Users of CASPs transferring <1000EUR to their own wallet - no need to verify ownership of wallet.

-For transfers >1000EUR to user's own wallet - CASP needs a #proofofownership (for the first transfer).

12/18
▶️Transfer of assets between CASP and a third-party #selfhostedwallet

-#Risk-based approach - CASP needs to have internal policies and procedures to identify and assess ML/TF risks associated with transfer.

-IF there is a risk identified with the transfer, then...

13/18
... the CASP must take #riskbased measures to either:

(a) verify the identity behind the #wallet;

(b) require additional info on #origin and destination of transfer;

(c) conduct #enhanced ongoing monitoring of those transactions (e.g. using #blockchain analytic tools).

14/18
📖 Guidelines

Withing 18 months from the #TFR entry into force, the @EBA_News will specify which risk-mitigating measures, internal policies and procedures #CASPs can take when they have identified a risk with a transfer to self-hosted #wallets.

15/18
🌪️ Mixers

The @EBA_News will also clarify #risk factors to be taken into account by CASPs when transacting with non-regulated entities, with particular attention to "technologies that favor anonymity" such as #privacy wallets, #mixers or #tumblers.

16/18
⏭️Next steps (1/2)

Q1 2023 - Entry into force

Q3 2024 - Application date, together with #MiCA

↪️ 1 year after entry into force of #AML Regulation - Update of TFR in light of new AML Rules

Q1 2027 - #TFR Review

17/18
⏭️Next steps (2/2)

Q3 2024 - @EU_Commission assessment of need for extra risk-mitigating measures on transfers with #selfhostedwallets

Q2 2022 - Commission + @EBA_News risk assessment of transfers with self-hosted wallets or CASPs in third countries

18/end

• • •

Missing some Tweet in this thread? You can try to force a refresh
 

Keep Current with Blockchain for Europe

Blockchain for Europe Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!

PDF

Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @BlockchainforEU

Oct 6
📢#MiCA is complete!

The landmark #crypto regulation sets out uniform 🇪🇺 requirements for offerors of #cryptoassets and service providers (#CASPs) to apply for authorisation in the Single Market.

👀🧵for a full dive on #MiCA and what it means for the #cryptoindustry.

1/22
Even though a better agreement was close last week, 🇫🇷 vetoed it during the 🇪🇺 MS intervention period & raised concerns on USD-denominated #stablecoins used as a "means of #exchange", suggesting a return to their restriction when used for #settlement purposes ❗️

2/22
The compromise was to at least clarify that USD-#stablecoins used for spot #trading would NOT be captured.

The final text was approval by #COREPER yesterday and @EP_Economics will do it on 10/10. Final adoption by Ministers and the Parliament’s Plenary will be end of Oct.

3/22
Read 22 tweets
May 17
Latest UPDATE on the #TFR (Travel Rule) trilogue:

EU institutions are working to finalise the #TFR text to implement the #travelrule in Europe. Please find below the latest details. The aimed-for deadline for conclusion is still the first week of June.

1/9
Key issues on table:

The provisions introduced by the @Europarl_EN requiring #verification of information for each transfer of assets, the additional requirements applied to transfers to #unhosted wallets and the #blacklist of non-compliant entities.

2/9
In the past weeks, the @EUCouncil has taken onboard the concerns from the blockchain & crypto #industry, as well as those of regulators and competent #authorities (!), that flagged the impracticality and unintended consequences these provisions would have.

3/9
Read 9 tweets

Did Thread Reader help you today?

Support us! We are indie developers!


This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Don't want to be a Premium member but still want to support us?

Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal

Or Donate anonymously using crypto!

Ethereum

0xfe58350B80634f60Fa6Dc149a72b4DFbc17D341E copy

Bitcoin

3ATGMxNzCUFzxpMCHL5sWSt4DVtS8UqXpi copy

Thank you for your support!

Follow Us on Twitter!

:(