Cryptocurrencies such as Bitcoin, Ethereum or Tether have become more attractive as a tool for money launderers in recent years - also because, unlike normal means of payment, they were practically unregulated.

The EU now wants to change that.

On Thursday night, the negotiators of the member states and the European Parliament agreed on a provisional new version of the money transfer regulation.

It sets rules for crypto transfers for the first time.

These should become more transparent and thus better traceable.

Werner Mussler

Business correspondent in Brussels.

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In the future, crypto platforms will therefore have to determine information about senders and recipients when they process transactions.

It does not matter how high the transferred amount is.

In the event of an investigation into money laundering or terrorism, the providers must also forward the information to the relevant authorities.

The new regulation was "particularly urgent in the current geopolitical context", according to a statement by the EU Council of Ministers.

In the law, the EU focuses on the point where Bitcoin, Ethereum and other digital currencies are exchanged for conventional money such as euros or US dollars.

Therefore, direct transfers between holders of platform-agnostic crypto purses or wallets are left out.

But they would be difficult to control anyway.

There is also a special regulation when crypto platforms process transactions with such independent wallets: Here the information obligation only applies to amounts of 1000 euros.

Rules are tightened

The European Parliament's chief negotiator, Spanish Green MEP Ernest Urtasun, said the compromise tightens the EU's anti-money laundering regime while making crypto transfers more secure.

"We hope that other countries pass similar laws against crypto-money laundering." Belgian MP Assita Kanko from the conservative ECR group said the recast law makes the misuse of crypto assets significantly more difficult.

“Terrorists have been able to fundraise with it for too long, and criminals have laundered their money with it for too long.

This will now become significantly more difficult and innocent traders and investors will be better protected.”

Left-wing parliamentarian Martin Schirdewan, who recently also became the national chairman of his party, pointed out that in Germany alone, suspicious reports of money laundering using crypto assets had almost tripled in 2020 alone.

"Therefore, it was high time that we enforce strong transparency rules for transfers with Bitcoin, Ethereum and Co." The CSU MP Markus Ferber was pleased that the tightening originally demanded by the left-wing factions are not included in the compromise text.

The "worst excesses" - specifically the regulation of direct transfers between holders of platform-independent crypto wallets - have been avoided.

For the latter, no anti-money laundering rules are required.

"Anyone who demands something like this will target cash next."

The preliminary agreement still has to be approved by the relevant committees and the plenary session of Parliament, as well as the representatives of the member states.

This is considered a formality.

The situation is different with a second agreement, which the outgoing French EU Council Presidency also brought about between the member states on Thursday night.

It concerns the planned EU anti-money laundering authority.

In the future, this should be able to directly control banks and other financial institutions if there is a high risk of money laundering.

Providers of crypto assets are also included, insofar as they are considered risky, according to a statement by the Council of Ministers.

Up to 40 financial groups are expected to be affected.

Banking supervision not effective

In the EU, it has long been recognized that a separate anti-money laundering authority is necessary because the EU banking regulator EBA has not effectively fought the fight against money laundering.

In addition, the new institution should coordinate the national supervisory authorities and establish common, uniform standards.

So far, it has been criticized that the application of the relevant provisions varies greatly from Member State to Member State.

With the decision of the Member States, it is finally clear that the new authority will come.

So far, the plan is for it to become active by 2026 at the latest and employ around 250 people.

Of these, 100 positions are intended for the supervision of money laundering risks in the banking sector.

A new governance structure is envisaged for the new authority, which should make it less prone to conflicts of interest.

The six-member board of directors is to be filled exclusively with independent experts.

The exact powers of the authority have not yet been clarified, however, because the European Parliament, which has co-decision-making powers in legislation, is only just beginning its deliberations.

The majority of MEPs are pushing for more powers for the EU institution.

Negotiations on this with the Council of Ministers are not expected to begin until late this year.

The seat of the new authority is still open.

The member states decide on this without parliamentary participation.

At the forefront, Frankfurt and Paris are fighting for the bid, each with the argument that there are enough staff with experience in financial market regulation.

The European Central Bank has its headquarters in Frankfurt, which also has considerable powers in banking supervision.

In addition to the EBA, the market surveillance authority ESMA is also based in Paris.

Italy is also very interested in the anti-money laundering authority.