REGULATIONS

Crypto Travel Rule Regulations in

European Union

by

European Parliament

🇪🇺
Travel Rule required from
Travel Rule regulation still pending
December 30, 2024
Content last updated
July 5, 2023

The European Union (EU) has led in establishing a comprehensive regulatory framework for the crypto industry. This framework includes the Markets in Crypto-assets (MiCA) Regulation, which sets out a uniform legal framework for crypto-assets in the EU. The MiCA Regulation covers various areas, such as consumer protection, asset classification, licensing requirements, and market abuse.

In addition, the Transfer of Funds Regulation (TFR) regulates how the EU will implement the Financial Action Task Force’s crypto Travel Rule. Both the MiCA and TFR Regulations were approved on April 20, 2023. The Travel Rule for crypto-asset service providers in Europe will come into effect on December 30, 2024.

Timeline of regulatory action in the European Union:

  • July 20, 2021 - The European Commission proposed a crypto legislative framework, recasting EU 2015/847 to create a new, more coherent AML/CTF regulatory and institutional framework for the crypto industry.
  • June 29, 2022 - All parties finally reached a provisional agreement on the TFR. 
  • April 20, 2023 - The European Parliament approved both MiCA and the revised TFR establishing a uniform legal framework for crypto-assets in the EU and boosting consumer protection.
  • June 9, 2023 - The Transfer of Funds Regulation is published in the Official Journal of the European Union.
  • December 30, 2024 - The crypto Travel Rule will come into effect for all EU CASPs.

Crypto Regulations in the European Union


1. Is cryptocurrency legal in the European Union?

Cryptocurrencies are legal across the European Union with individual member-state regulations. Cryptocurrency taxation varies from country to country, where some charge tax on derived earnings at rates of 0 to 50%. In 2015, the Court of Justice of the European Union ruled that exchanges between traditional currency and crypto or virtual currencies should be exempt from VAT (value-added tax) as cryptocurrencies constitute services rather than goods.


2. Are there AML crypto regulations in the European Union?

Yes. In 2021, the European Commission published legislative proposals to strengthen the EU's anti-money laundering and counter-terrorism financing (AML/CFT) rules. This package, including MiCA and the TFR, was approved on April 20, 2023.


3. Is the Crypto Travel Rule mandated in the European Union?

Yes. The crypto Travel Rule was mandated in the European Union on June 20, 2021. [1]


4. Who is the Crypto Travel Rule Regulator in the European Union?

The European Banking Authority (EBA) is the cryptocurrency regulator in the European Union.


FATF Travel Rule requirements in the European Union

1. Are there licensing or registration requirements for VASPs in the European Union?

Currently, EU CASPs are not subject to licensing or registration requirements at the EU level. Still, CASPs may have registration requirements with their respective national regulators, such as Germany's Financial Supervisory Authority (BaFin) or Italy's Ministry of Finance. Once CASPs are authorized or receive licenses granted by these regulatory bodies, they can operate across Europe under a single regime.


2. When does the Crypto Travel Rule go into effect in the European Union?  

The crypto Travel Rule will go into effect on December 30, 2024, 18 months after the Transfer of Funds regulation entered into force.


3. Does the European Union permit a grace period to comply with the Crypto Travel Rule?

The recent European proposal for crypto regulations did not mention a grace period.


Complying with the FATF Crypto Travel Rule in the European Union


1. What is the minimum threshold for the Crypto Travel Rule in the European Union?

The revised TFR removed the de minimis threshold, meaning that, once in force, EU CASPs must comply with Travel Rule obligations for every transaction, regardless of its amount. Previously, the threshold was set at 1,000 EUR.

Read our assessment of the European Commission's recent Crypto Travel Rule proposal to learn more. 

2. What are the PII requirements for the Crypto Travel Rule in the European Union?

The Travel Rule data requirements in the EU are in line with FATF requirements. According to Article 14 of the recent legislative proposal, the following information must accompany the transfers of crypto-assets: 

Source: EU Parl and Council’s Transfer of Funds Regulation, page 69, paragraph 1. Illustrated by Notabene.


3. Are there differences in customer PII requirements for cross-border transfers versus transfers within the EU?

No. The revised TFR removed the simplified requirements for transactions within the European Union. TFR recital 27 points out that cryptoasset transfers and services are inherently borderless and have a global reach. This revision aligns with the FATF's requirement to treat all cryptoasset transfers as cross-border, which means there will be no distinction in the scope of obligations when transacting within or outside the Union. [2]

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4. What are the non-custodial or self-hosted wallet requirements in the European Union?

For transactions exceeding 1,000 EUR with self-hosted wallets, European CASPs must collect the required originator and beneficiary information and comply with the following additional wallet verification obligations: 

  1. The originator CASP must verify if the wallet is owned or controlled by the originator customer when sending a transfer exceeding 1,000 EUR, 
  2. The beneficiary CASP must verify that the beneficiary customer owns or controls the originating wallet when receiving a transfer exceeding 1,000 EUR. [3]

This means wallet ownership verification requirements apply to first-party transactions to/from self-hosted wallets exceeding EUR 1,000.


Why choose Notabene for Crypto Travel Rule Compliance in the European Union?

Notabene helps European CASPs and financial institutions comply with the European Commission’s implementation of the crypto Travel Rule. Notabene’s SafeTransact is the only pre-transaction decision-making platform in the crypto industry, enabling customers to identify and prevent high-risk activity before it occurs. Especially important for EU CASPs, our self-hosted wallet identification tool collects wallet ownership verification data from your customer from the withdrawal screen and pinpoints and applies the jurisdictional requirements of each regulated transaction. Our privacy-preserving platform operationalizes crypto Travel Rule compliance from end to end, permitting CASPs to comply with specific regulatory differences in any jurisdiction.

References

[1] The European Commission published a proposal to regulate information accompanying transfers of funds and certain crypto assets, which called for consistency with the FATF Travel Rule. (p3 COM(2021) 241 final.)

[2]  The European Parliament and the Council of the European Union (2023). The Transfer of Funds Regulation p. 6, para. 27.

[3] The European Parliament and the Council of the European Union (2023). The Transfer of Funds Regulation p. 8, para. 39.

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