The European Union Tightens Regulations, Adding Tracing Of The Transfers Of Crypto Assets

The European Parliament made a stunning new regulatory tightening, as now both the Parliament and the Council agreed to add crypto-asset tracing in a new bill. However, such an agreement is nothing new in the traditional finance sector, as the “travel value” rule already applies to the European financial sector.

By adding crypto asset transaction traceability, the new rule aims to block suspicious transactions taking place in the crypto market.

„This rule requires that information on the source of the asset and its beneficiary travels with the transaction and is stored on both sides of the transfer. Crypto-assets service providers (CASPs) will be obliged to provide this information to competent authorities if an investigation is conducted into money laundering and terrorist financing.“ the official press release notes.

Tightening amid crypto adoption

It seems like the European Union is on a regulation-tightening spree, as the current crypto landscape gives no assurance of security when it comes to money laundering. Furthermore, one of the biggest crypto exchanges in the world, Coinbase, sharply criticized EU lawmakers, as the crypto market continues its growth and adoption would induce more and more low-value transactions, which, under current regulations, would also fall into the anti-money laundering procedures. Coinbase added that if the AML procedures are going to impact low-value, it would be “neither feasible nor right from the privacy point of view.”

EU lawmakers replied that “if there is no guarantee that privacy is upheld by the receiving end, such data should not be sent.”

“Before making the crypto-assets available to beneficiaries, providers will have to verify that the source of the asset is not subject to restrictive measures or sanctions, and there are no risks of money laundering or terrorism financing.” EU authorities added.

SEC rejects Grayscale’s Bitcoin spot ETF

And while EU lawmakers are thinking about how to secure digital assets from falling victim to anti-money laundering, the U.S. SEC yet again stopped a spot ETF proposal. This time, the regulator rejected Grayscale’s proposal of converting its Bitcoin Trust into a spot exchange-traded fund.

The regulator stated that the rejection comes as a result of the proposal not meeting standards, designed to prevent fraudulent and manipulative market practices, adding that the SEC did not make an “assessment of whether Bitcoin or blockchain technology more generally, has utility or value as an innovation or an investment.”

Grayscale CEO Michael Sonnenshein immediately responded with a lawsuit against the SEC, claiming that the SEC has violated the Administrative Procedure Act and Securities Exchange Act.

“The SEC is failing to apply consistent treatment to similar investment vehicles and is therefore acting arbitrarily and capriciously in violation of the Administrative Procedure Act and Securities Exchange Act of 1934,” Grayscale’s Senior Legal Strategist and former U.S. Solicitor General Donald Verrilli responded.

Meanwhile, Grayscale’s long-awaited conversion, with over 11,400 responses during the 240-day review period, with over 99% supporting the fund conversion, sparked a wave of negativity towards the regulator. “We are deeply disappointed by and vehemently disagree with the SEC’s decision to continue to deny spot Bitcoin ETFs from coming to the U.S. market,” Grayscale’s CEO added.