Thread by @finhstamsterdam

Thread on constitutionality of the Travel Rule in crypto.

On june 9, 2023, the EU took the FATF rule 7b some steps further into the TFR regulation.

It is little known however, that until 22 of August, it is possible to challenge it on constitutional grounds.

How? Read on!

First we take the travel rule as now adopted. You can find it here. Look at the scope and the difference between fiat and crypto.

For fiat - 1000 EUR exemption applies.
Crypto - no exemption.

https://t.co/HAaeGwfjbmeur-lex.europa.eu/legal-content/…

The FATF (more on that later) in its guidance allows for more leniency than the EU regulator/politicians have provided. In particular they seem to strike out the 1000 EUR threshold.

See their guidance here.

https://t.co/G5Ol5XHYY4fatf-gafi.org/content/dam/fa…

The main idea in the travel rule is to throw in information about sender/receiver of payments or crypto transfers in the value chain.

It's not a good idea. In fact the cryptocommunity in 2019 advised the FATF to just require that information be made available. More proportional.… https://t.co/xiWePOrNSbtwitter.com/i/web/status/1…

FATF is not a formal international organisation by the way. It is still a project group since 1989. Deliberatey so, so it hasn't got the need for formally subscribe to principles like UN treaties as the UN resolution privacy in a digital age.

https://t.co/YQ5dghVRO9digitallibrary.un.org/record/3837297…

Now look at the difference between rules for fiat and crypto, in terms of adding information and applicable regimes. Crypto transfers (widely defined) need to throw in a huge chunk of info more, using only the international regime.

That's deliberate, but not founded by data or… https://t.co/y82epBWul4twitter.com/i/web/status/1…

And now look at the concerns of the European Data Protection Board, voiced in April 2023, outlining that regulatory alliance of Commission, Member States en EU Parliament may be going too far in infringement of fundamental rights and privacy.



This is… https://t.co/6SfhuuT6i7 https://t.co/hBejXlipfJedpb.europa.eu/system/files/2…
twitter.com/i/web/status/1…

Some smart readers of this thread will say: hey Simon. This EDPB letter refers to different legislation: why are you mixing these two up?

Well, because they are mixed up. The rules that the EDPB outlines also cover the transaction data in the Travel Rule which must be stored.

The EU Court of Justice is not too happy about too extensive broadcasting and availability of customer data. It has verdicts in all kinds of areas, telecom, passenger data, ubo register which all limit the use of personal data to what is strictly needed.

curia.europa.eu/jcms/upload/do…

So what we can see is that we have the FATF 'recommending' to spread out data all over the world (a bad idea to begin with) and the EU rulemakers topping it up to a degree, eliminating proportionality and finalizing the rule without understanding it is related to other rules.

There are fundamental arguments against the whole EU travel rule as well as the part where it is disproportional in its workings. A list of fundamental arguments is presented in 2019 to Dutch Finance Minister Hoekstra.

Read the letter.
https://t.co/41q9S1ninMbitonic.nl/public/2019052…

Back in 2019 the Ministry of Finance said. Well, wait and see, it's just a recommendation of the FATF. The soup won't boil over. Just rest assured all privacy principles will be taken onboard.

That turns out to be incorrect; see the letter of the European Data Protection Board.

I recall having contributed to the US consultation on the travel rule. In brief weeks we had to react and respons to similar ideas in US.

Have a read at my response, listed here on my blog. It outlines the fundamental issues at stake.

https://t.co/vLlTxTSiBwmoneyandpayments.simonl.org/2021/01/respon…

I think the international crypto community should realize that is has the opportunity to challenge the travel rule of the FATF here in Europe before the European General Court under rules of annullment.

But you must be quick.

https://t.co/ONz03zTZMIeur-lex.europa.eu/EN/legal-conte…

There is only until August 23 (2 months and 14 days) to file a legal action to request a ruling that forbids the travel rule coompletely (as being superflous with availability of data being most important) or with respect to thresholds and such.

https://t.co/hI8eodTGpTcuria.europa.eu/jcms/upload/do…

I am now underway in the work of setting up a coordinated action to challenge the TFR in EU. The Dutch environment is particularly suited for this because we have a court case of premature application of this rule being denied.

finhstamsterdam.medium.com/dutch-judge-sl…

And then, there is lots more to say on the topic, but for that please have a listen/read on a number of posts at my blog, in podcasts etc.

https://t.co/07torOFZrrmoneyandpayments.simonl.org/2019/06/g20-an…

Or have a listen at the video here (also dating back from 2019).

Have a listen to this 2019 podcast with bitcoin magazine.

Or listen to the youtube here.

Or to Stephan Livera's podcast.

podcasts.apple.com/us/podcast/slp…

Yes, I know, I'm a little late, but other things sometimes stand in the way of acting timely on these matters.

In any case, should you or your organisation wish to follow up, it's not hard to find me.

@izakaminska @iang_fc @EU_EDPB @toezicht_AP