INATBA’s European Parliament Event Recap: Are Crypto-Assets Different? – Ensuring Proportionality and Technological Neutrality in the AML Standards of the EU

 

INATBA, alongside the leadership of the Vice President of the Parliament, MEP Eva Kaili, hosted a debate in the Parliament which focused on the Travel Rule Requirements, otherwise known as the TFOFR. The participants of this event included: 

  • Paul Tang, MEP, ECON
  • Joana Neto, European Banking Authority
  • Chris Brummer, Professor of Law, Georgetown University
  • Claire Wells, Coinbase, INATBA member
  • Sian Jones, XReg Consulting, INATBA member
  • Barbara Halasek, Coinfirm, INATBA member
  • Dominik Schiener, IOTA, INATBA member
  • Mr Gabriel Hugonnot – Seconded Official – Seconded National Expert- anti-money laundering policy, DG FISMA;
  • Marc Taverner, Executive Director of INATBA
  • Dimitrios Psarrakis, XReg Consulting, INATBA Finance Working Group Co-Chair

The event aimed to address the following issues:

  • Is the TFR, as amended by the Parliament and the Council, proportional or distorts the spirit of the FATF Recommendation?
  • Is the TFR disproportional and violates technological neutrality?
  • Are the TFR provisions technologically feasible and cost-efficient?
  • Does the AML approach of the Parliament and the Council compromise the capability of the EU to become a competitive global center in the field of crypto-assets?

After a brief introduction by MEP Eva Kaili and INATBA’s Executive Director, Marc Taverner, MEP Paul Tang was one of the first to take the stage. MEP Tang is a member of the ECON Committee responsible for analysing and providing amendment suggestion to incoming financial regulations, especially the AML package which aims to limit money-laundering and terrorist financing in Europe and beyond.

MEP Tang’s clear message on the TFOFR was that Europe “needs to find a balance in fighting money-laundering and terrorist financing, and the work imposed onto the banking and crypto sectors.” Crypto is a special focus of these rules since “Crypto is growing fast enough that it has captured the interest of policy makers; and that is a good thing”. As a combination of the above two statements, MEP Tang said that policy makers “looked closely at the banking system to come up with AML requirements placed on the crypto industry. We are regulating CASPs, not the individual users. (…) When withdrawing money from the banking system, you need to identify yourself. This must happen with crypto too. (…) This is nothing new we are doing here,” he added. 

Following MEP Tang was Joana Neto of the European Banking Authority. Ms. Neto expanded on the rationality of the changes introduced to the original draft of the TFOFR with the amendment suggestion proposed by both the European Parliament and Council. She stated that the ”first version of the TFOFR was published in June/July by the European Commission. This was before the new FATF guidance on AML for VASPs which was issued in November.” The Financial Action Task Force, often abbreviated to FATF, is “the global standard setter for AML”, Ms. Neto stated. “Europe must comply with these standards.” She added “hence why the Parliament addressed these new insights through the points proposed in their April publication” of amendments. Lastly, Ms. Neto stated “lack of evidence is very much an issue with crypto-assets”, which makes policy-making and oversight exceptionally hard.

Next in the stage was Mr. Gabriel Hugonnot of the European Commission; one of the key draftspersons of the initial position sent to the Parliament. On the inclusion of transactions with unhosted wallets in the scope of the regulation, Mr. Hugonnot stated “There is a consensus among the legislators that the TFR recast must cover transactions between unhosted wallets and registered CASPs”. As such, “the FATF standards only require to collect and hold information on the persons at the two ends of the transfers, and to keep it available for competent authorities. It also requires the CASPs to verify the accuracy of the information received from their own customers, either beneficiary or originator, but not the one received from outside counterparts”. “This is also true in the context of transactions involving unhosted wallets” he stated. 

Furthermore, on the threshold issue, Mr. Hugonnot stated that “the EC initial TFOFR recast proposal entails such a threshold, as it was an option open by FATF rules and proportionate to the treatment of fund transfers. The Council and the EP now seem to agree to withdraw it. The Commission recalls that the final solution adopted by the co-legislators will have to be risk-based and proportionate, and it is to the legislators to decide and to justify their choice on the issue.” 

Following Mr. Hugonnot was a series of speakers, including Prof. Chris Brummer of Georgetown University, Claire Wells of Coinbase, Barbara Halasek of Coinfirm, Dominik Schiener of IOTA, Sian Jones and Dimitrios Psarrakis of XReg Consulting, followed by a great conversation during the Q&A. During this section, speakers and the audience presented a series of crypto asset use-cases that could be negatively affected by the impending regulations. Some of these examples included machine-to-machine transactions, retail transactions to buy groceries and micro-consumables with crypto and more. 

Overall, speakers, panelists and attendees indicated that the event was a great initial conversation, and one that preempts more upcoming discussion. One participant stated that “INATBA’s event was a fantastic first event on the Travel Rule and one which aims to ensure the proportionality and technological neutrality in the AML standards of the EU”. 

As a final remark, MEP Tang suggested that “the industry must become better advocates of themselves”. “The Banking Industry also complains of these requirements” he mentioned, “and they are better at doing advocacy than the crypto sector”. 

INATBA stands ready to hear MEP Tang’s suggestion and represent the industry widely in an upcoming series of events that will expand the discussion on the Travel Rule and its proportionality and both technology and business model neutrality. INATBA members can find the recording of the event through the member’s portal.

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