German Ministry of Finance opposes senseless restrictions on cryptotransactions in the EU

Discussions on endangered regulation, called the Transfer of Funds Regulation (TFR), are ongoing at European Union level, which should include guidelines to limit the anonymous use of cryptocurrencies in the EU.

The forthcoming TFR legislation is to include requirements for financial institutions, which will be required to obtain information from the sponsors of cryptocurrency transactions on the identity of the beneficiary of the transaction if it is a private wallet. An example is a cryptocurrency transaction from a cryptocurrency exchange to a private wallet, which should include a process to verify the identity of the holder of such a wallet.

This legislation is problematic from two angles – on the one hand, it significantly reduces the anonymity of cryptocurrency transactions, which is perceived extremely sensitively in the crypto-community, and at the same time creates a requirement for exchanges or crypto custodians that they may not be able to meet in practice. This could ultimately lead to a reduction in their services within the EU.

Legislation passed the first round of voting in the EU in March and is currently the subject of tripartite discussions between the European Council, the European Commission and the European Parliament. These discussions usually last several months.

Patrick Hansen, who monitors cryptocurrency issues within the European Union in detail via his Twitter, reported on the positive signs in favor of those who oppose such severe restrictions.

The Germans are against, will there be adjustments?

As the legislation is not yet in force, it can be amended or withdrawn from the table altogether. Fresh reports suggest that such hope still exists. Patrick Hansen said that the German Bundestag had opposed this form of restriction on user privacy, according to an open letter between Florian Toncar, Secretary of State of the German Ministry of Finance, and Frank Schaffler, Member of the German Bundestag.

1/6 Good news wrt the TFR (AML rule) in the EU 👏

In a letter from State Secretary @florian_toncar to MP @f_schaeffler the German Ministry of Finance opposes

• the comprehensive verification of “unhosted” wallets
• suspicion-independent transaction reports to AML authorities pic.twitter.com/z4rCcF1cW5

– Patrick Hansen (@paddi_hansen) June 1, 2022

“According to the letter, these demands of the European Parliament are difficult to reconcile with the risky approach to AML / CFT and go beyond the requirements of the FATF. That is why the EU Council (EU Member States) is acting against these regulations in the current trialogues.” Hansen explains, who continues:

“Instead, the letter proposes to use blockchain analysis tools to assess the risk of the transfer in question and to take measures commensurate with the risk, similar to the introduction in Germany last year of the so-called travel rule. This is one of the key requirements of the crypto-industry.”

Hansen claims that the demands made in recent months are registered and registered by EU legislators, which he sees as a positive fact.

“Concerns about the European Parliament’s demands are also supported by a significant wave of comments from the industry. We will see if the European Council can convince the European Parliament in the next negotiations, but if this position were adopted by the largest EU member state (Germany), it would be a good starting point,” added Hansen, referring to the letter between Florian Toncar and Frank Schaffler.

“I am pleased that the federal government is taking a stand against the nonsense of the original transfer-of-funds draft regulation. Now I hope that the federal government will prevail in the council and ultimately also in the trialogue in order not to let Europe become crypto Wallachia and to continue to enable new DeFi projects.” quoted Schaffler on the gettotext.com portal.