Cryptocurrency exchanges like Binance, Coinbase and Kraken could be forced to collect the details of people sending and receiving crypto under new rules proposed by the European Commission.
The EU’s executive branch announced the potential change on Tuesday as part of a package of reforms aimed at tackling financial crime within the bloc.
“The aim of this package is to improve the detection of suspicious transactions and activities, and to close loopholes used by criminals to launder illicit proceeds or finance terrorist activities through the financial system,” the Commission said in a statement.
The proposed rules would require cryptocurrency exchanges to collect customers’ identifying information, bringing them in line with the “Know Your Customer” (KYS) rules already imposed on other financial institutions.
The new law would also establish a new EU-wide anti-money laundering authority (AMLA) with oversight of cryptocurrencies by 2023.
How would this affect cryptocurrency trading?
Some crypto-asset service providers are already covered by the EU’s anti-money laundering and terrorism funding rules.
The proposed law would apply these rules to the entire crypto sector, forcing service providers like crypto exchanges to carry out due diligence on their users.
This would bring crypto-assets in line with bank transfers, applying what is known as the Travel Rule to crypto transactions to make them traceable.EU Commissioner Mairead McGuinness tweeted about the plans
In practice, this means that a service provider exchanging crypto on behalf of a customer would have to record their name, address, date of birth and account number, as well as the name of the intended recipient of the transfer.
Anonymous crypto-asset wallets would also be banned under the new law – just as anonymous bank accounts already are – in an effort to make transactions using Bitcoin and other cryptos fully traceable.
‘A harmonised framework’
“These proposals have been designed to find the right balance between addressing these threats and complying with international standards while not creating excessive regulatory burden on the industry,” the European Commission said.
“These proposals will help the EU crypto-asset industry develop, as it will benefit from an updated, harmonised legal framework across the EU”.
EU states and the European Parliament have the final say on the proposals, meaning it could take two years for them to become law.
— With files from euronews.com Press