In parallel with the MiCA regulation, the Council of the European Union has also adopted the Transfer of Funds Regulation (TFR), a set of texts which aims to drastically increase the monitoring of cryptocurrency flows between digital asset service providers. What will change in your daily life as soon as these measures come into force?
TFR about to enter into force in the European Union
It will not have escaped you, the European Union is making great strides in establishing a regulatory framework for the cryptocurrency ecosystem.
In parallel with the approval of the MiCA regulation by the Council of the European Union, the latter also validated another aspect of the regulation: the Transfer of Funds Regulation (TFR).
💡 Before discovering the TFR measures, find the flagship measures of the MiCA regulation which will come into force in 2024.
As with MiCA, TFR must still be validated by the European Parliament on October 12, but the outcome of the vote is already known, because TFR was the subject of a political agreement between the institutions concerned last June. After this vote, TFR will be entrusted to lawyers and linguists in order to be published in the Official Journal of the European Union.
The provisions of the TFR will then come into force in 2024, 18 months after its publication in the Official Journal.
What are the changes made by TFR?
the Transfer of Funds Regulation rhymes with the arrival of the Travel Rule for cryptocurrencies. The Travel Rule is a provision recommended by the Financial Action Task Force (FATF), which obliges the actors concerned – the Crypto Asset Service Provider (CASPs), equivalent to PSANs in French, — to exchange information about their customers for certain transfers.
This rule was developed to fight against money laundering and the financing of terrorism (LCB-FT). The Travel Rule will also allow businesses to report suspicious activity and authorities to demand details of transactions.
Let’s see this in more detail with the 3 situations provided by TFR.
The Travel Rule between CASPs
In the context of the application of the Travel Rule, the biggest problem for CASPs and their users lies in the fact that the rule applies regardless of the amount transferred. So even if you only transfer €5 in Bitcoin (BTC) from one platform to another, the Travel Rule will apply.
This implies that the ordering CASP must transmit with your transaction your surnames and first names, the destination wallet, your account number, your postal address, your identity number (identity card or passport) or your date and Place of birth.
On the side of the CASP beneficiary of the transaction, the latter must transmit your first and last names, your address and your account number.
To comply with the Travel Rule, solutions like VerifyVASP (UpBit and Chainalysis) or TRUST (Coinbase) already exist. These entities represent conglomerates of players who have developed solutions for easily exchanging their customers’ data within the framework of the Travel Rule.
The Travel Rule between a CASPs and a self-hosted wallet
For transfers from a CASP to a self-hosted wallet (i.e. all the wallets where the user has his private key), the Travel Rule will apply from a threshold set at €1,000.
Initially, all transfers between a CASPs and a self-hosted wallet were affected by the Travel Rule. It is therefore a small victory for the ecosystem.
To comply with the Travel Rule in such a situation, solutions like Sismo and Anima Protocol are considered.
The Travel Rule between self-hosted wallets
Among all these provisions, it should be noted that the Travel Rule will not apply to exchanges between 2 self-hosted wallets. For example, a transaction carried out between 2 MetaMask wallets will not be subject to the Travel Rule.
What about GDPR?
Regarding the GDPR (General Data Protection Regulation), CASPs will have to respect its provisions while applying the Travel Rule. On this subject, the Adan adds:
“A CASP may block a transfer if it deems that the other CASP opposite does not comply with the GDPR or that it does not have sufficient security measures [pour contrer les hacks ; NDLR]. »
We thank Adan (Association for the Development of Digital Assets) for answering our questions about TFR.
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Source: Document published by the Council of the European Union
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Editor-in-chief of Cryptoast, I discovered Bitcoin and blockchain technology in 2017. Since then, I have been striving to share quality content so that the sector becomes more democratic for everyone.
Clement Wardzala
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