Crypto industry representatives are aiming to limit the proposal’s potentially harmful influence on the sector’s development as the European Union institutions continue to debate on the controversial Transfer of Funds Regulation (TFR).
The rule might open the door for a crackdown on “unhosted wallets,” or just plain crypto wallets, among other things. Every transfer of at least EUR 1,000 from a non-wallet must be reported to the authorities, according to Article 5 of the draft (USD 1,1115).
In a letter to members of the European Parliament, Lavan Thasarathakumar, Director of Government and Regulatory Affairs at Global Digital Finance (GDF), said the industry body wants to draw attention to the need to: adopt a proportionate approach to “unhosted wallets,” reinstate the EUR 1,000 threshold and remove blanket reporting to competent authorities, and extend the phase-in period.
“GDF proposes that a period of 12 months for phase-in requirements and 24 months for implementation are put in place. This will give exchanges enough time to put in place the measures to deal with this,” he said.
While the GDF applauds the anti-money laundering package, Thasarathakumar expressed worry that “the restrictions stated above may lead to exchanges deeming it commercially unviable to engage with unhosted wallets; creating a de facto prohibition” inside the crypto industry.
Meanwhile, Patrick Hansen, Unstoppable Finance’s Head of Strategy and Business Development, tweeted that, with the European Parliament’s Committee for Economic and Monetary Affairs (ECON) set to vote on the draft regulation on Thursday, Brussels has left him and other industry players with “no choice” but to “ring the alarm bell again.”
“The ECON committee and each political group (party) are still in final discussions on the compromise draft. Due to the tight timeframe, it is unlikely that there will be substantial changes to the compromise draft prior to Thursday,” Hansen said.
He was joined in his criticism by other crypto industry representatives:
According to Hansen, the Socialists and Democrats, the parliament’s second-largest party, as well as far-left and green MEPs, are expected to vote in support of the contentious changes. Simultaneously, the European People’s Party (EPP), which includes conservative and far-right lawmakers, is anticipated to vote against them.
The restriction on ‘unhosted wallets,’ according to Stefan Berger, a German member of the EPP in charge of shepherding the crypto-focused Markets in Crypto Assets (MiCA) legislation, is “disproportionate and destructive to the DeFi [decentralized finance] industry.”
Michiel Hoogeveen, a Dutch MEP from the European Conservatives and Reformists party, has also stated that he will vote against the contentious section.
The “amendments to the Transfer of Funds Regulation make transfers to a wallet unnecessary complicated, come with privacy risk and will hinder innovation.”
Under the EU’s complicated legislative procedure, the Council of the European Union, which is made up of ministers from 27 member states, and the European Parliament, the EU’s only directly-elected entity, are involved in so-called trilogue negotiations on legislative proposals.
Within this framework, tripartite discussions between the European Parliament, the Council, and the European Commission, which leads EU governance, may result in a temporary agreement on the draft law.
A hypothetical agreement between EU institutions would be informal, and each of the three institutions would have to approve it in writing.
Meanwhile, according to Fabio Panetta, a member of the European Central Bank’s Executive Board, “a greater degree of anonymity should be considered for lower-value online and offline payments” when it comes to the digital euro.
