As the world of crypto and NFTs continues to grow, more people are looking to use cryptocurrencies anonymously. But what are the rules around using crypto in EU countries? And what happens if you’re caught violating them?
Cryptocurrencies are still a relatively “new phenomenon,” and the EU is taking a cautious approach to their regulation. However, the new rules are a positive step forward for the mainstream adoption of cryptocurrencies.
In this blog post, we’ll take a look at the current regulations around crypto and travel in the European Union.
Stay safe and informed while globetrotting with your cryptos!
What Are The Eu Crypto Travel Rules, And How Do They Work?
The EU has recently introduced new rules governing the use of cryptocurrencies and other digital assets. These rules, which are part of the Fifth Anti-Money Laundering Directive (AMLD5), aim to prevent the use of cryptocurrencies for criminal and terrorist activities.
Negotiators from the Council presidency and Parliament have reached a provisional agreement on updating rules for information accompanying transfers of crypto assets – extending them beyond cash transactions in order to ensure financial transparency when trading these currencies as well as following international standards set forth through FATF recommendations 15 & 16 which deal specifically with terrorist financing concerns.
Under the new rules, all cryptocurrency service providers (CASPs) will be considered obliged entities under AMLD5. This means that they will be required to implement measures to prevent money laundering and terrorist financing.
In addition, all cryptocurrency ATMs will be captured by the rules. This is because transfers of cryptocurrencies pose an increased risk of money laundering (known as “smurfing”).
However, the rules will not apply to peer-to-peer (P2P) transfers where there is no obliged entity involved. The regulation will also apply to transfers from/to unhosted crypto wallets.
In case the transfer is sent to or from a wallet belonging to the CASP’s own client, verification of the beneficial owner’s identity will be required for large transfers of more than 1000 euros.
How Do Smurfing And Other Risks Pose By Crypto Transfers Increase The Need For Such Rules?
As mentioned above, one of the main risks posed by crypto transfers is smurfing. This is because criminals can use cryptocurrencies to break up large amounts of money into smaller transactions in order to avoid detection.
Other risks posed by crypto transfers include the fact that they can be made anonymously and that they are not subject to the same regulations as traditional financial transactions. This makes it easier for criminals to use cryptocurrencies for money laundering and terrorist financing.
How Should CASPs Go About Complying With The New Rules?
The new rules are designed to mitigate these risks by requiring CASPs to collect information on the originator and beneficiary of each transaction and to perform enhanced due diligence on transactions involving unregistered or unlicensed entities.
The main provisions of the new rules are that all cryptocurrency service providers (CASPs) will be considered obliged entities under AMLD5 and that they will be required to collect information on the originator and beneficiary of each transaction and to perform enhanced due diligence on transactions involving unregistered or unlicensed entities.
In terms of compliance, CASPs will need to put in place internal policies, procedures, and controls to ensure that they are able to meet these requirements. This may include ensuring that staff is trained to identify and report suspicious transactions and that systems are in place to capture and store the required information.
In terms of data protection, CASPs will need to ensure that they handle and store the information collected in accordance with GDPR requirements. This includes ensuring that only authorized staff have access to the information and that it is stored securely.
The new rules will come into force 18 months after the entry into force of the MiCA Regulation, which is expected to be in early 2024. This is much earlier than originally foreseen, as the file has been fast-tracked in order to address the risks posed by cryptocurrency.
What Are The Consequences For CASPs That Fail To Comply With The New Rules?
CASPs that fail to comply with the new rules will be considered to be operating abusively in the EU and will be included on a list of such entities. This will make it difficult for them to continue operating in the EU, as other CASPs will be required to perform more due diligence on transactions involving them.
In addition, CASPs that fail to comply with the new rules will be subject to the same sanctions as other obliged entities under AMLD5, including administrative sanctions and criminal penalties. This means that they could face fines or even imprisonment if they are found to have committed serious offenses.
The new rules are designed to address the risks posed by cryptocurrency and will have a significant impact on the way that CASPs operate. It is important for CASPs to understand the requirements and take steps to ensure that they are compliant.
EU Travel Rules Are Good for Crypto
As with any new travel regulation, there will be some growing pains as businesses adapt to the new requirements. However, in the long run, we think the crypto travel rules will be good for the industry.
They will help to ensure that cryptocurrencies are used for legitimate purposes, and they will also help to protect consumers from scams and fraud. Overall, In our opinion, the EU crypto travel rules will help to legitimize the cryptocurrency industry and make it more user-friendly.
However, users with a big web 3 mind and a favor for privacy and anonymity will surely not like this need law and update to cryptocurrencies in Europe as a whole.
Moritz Pindorek (Moritzpindorek.com)
Social Media, Marketing & Blockchain
Crypto/Web 3 Advisor, Top 10 Crypto Influencer 2022(Forbes Monaco) & Top 10 Entrepreneur 2022 (Forbes Monaco)
Owner and writer for Cryptouserguide.com