More than 40 crypto business leaders have asked the European Union not to require crypto firms to disclose transaction details and dial down attempts to bring to heel rapidly growing decentralised finance platforms.
The European Union, like countries and jurisdictions across the globe, is working to tame the freewheeling crypto sector. The EU is ahead of the United States and Britain in developing a set of rules for the $2.1 trillion sector.
In a letter seen by Reuters sent to 27 EU finance ministers on April 13, crypto businesses asked policymakers to ensure their regulations did not go beyond rules already in place under the global Financial Action Task Force (FATF), which set standards for combating money laundering.
EU lawmakers last month voted to back new safeguards for tracing bitcoin and other cryptocurrencies.
Under the new requirements agreed by MEPs, all transfers of crypto-assets will have to include information on the source of the asset and its beneficiary, information that is to be made available to the competent authorities. The rules would also cover transactions from so-called unhosted wallets (a crypto-asset wallet address that is in the custody of a private user). Technological solutions should ensure that these asset transfers can be individually identified.
The aim is to ensure that crypto transfers can be traced and suspicious transactions blocked. The rules would not apply to person-to-person transfers conducted without a provider, such as bitcoins trading platforms, or among providers acting on their own behalf.
The rules, opposed by major U.S. exchange Coinbase Global Inc, would require crypto firms to gather and hold information on who is involved in digital currency transfers.
In response to last month’s vote, 46 European crypto industry leaders and organisations said in their letter that the proposals “will put every digital asset owner at risk” by leading to public disclosure of transaction details and wallet addresses. This would reduce crypto holders’ privacy and safety, the letter’s organisers said.
The EU is also introducing a wider framework, known as MiCA, to regulate all issuers and service providers in the EU dealing with crypto assets. The European Parliament recently approved its draft of the regulation, which will be negotiated with the EU’s executive branch and heads of member states.
The letter asked that the EU excludes decentralised projects, which includes decentralised finance or “DeFi”, from requirements to register as legal entities. It also said that certain decentralised “stablecoins” should not be subject to the MiCA regulation. MEPs want the European Banking Authority (EBA) to create a public register of businesses and services involved in crypto-assets that may have a high risk of money-laundering, terrorist financing and other criminal activities, including a non-exhaustive list of non-compliant providers.
Britain has said it will regulate stablecoins, as part of plans to create a global cryptoasset hub.