Europe AML rules could implicate DeFi, DAOs and NFTs

Quick Take

  • A series of amendments drafted for the EU Parliament’s opinion on anti-money laundering regulation seems to eliminate rules on transferring funds to unhosted wallets.
  • The amendments push for including decentralized finance, decentralized autonomous organizations and NFTs into anti-money laundering provisions.
  • There remains a series of steps ahead for the draft amendments before they are adopted.

A series of amendments drafted by members of the European Parliament for its position on the anti-money laundering (AML) and counter-terrorism financing (CTF) regulation have the potential to make big changes to Europe’s regulatory landscape, according to the draft report seen by The Block.

The "Travel" rule imposing identity verification provisions on the transfer of funds involving so-called unhosted wallets — which previously caused a stir in the industry — seems to have been removed.

However, new amendments expand the regulation’s scope to cover decentralized autonomous organizations (DAOs), decentralized finance (DeFi) protocols and their developers, and people trading NFTs. The metaverse is also targeted as potential grounds for money laundering, and crypto-asset service providers may also be obliged to follow AML rules when dealing with transactions over €1000.

The provisions are a result of merging suggested modifications from the Parliamentary groups into compromise amendments — which try to cover all the different views.

The amendments still have a number of hoops to jump through before being formally adopted. First, they need to pass through a vote to enter into the European Parliament report on AML regulation. Then, the final report needs to pass a vote in plenary with all of the Parliament’s committees. After that, the report will represent the Parliament in the inter-institutional debates on AML.

The final report on the Parliament’s position is projected for December, and technical meetings on the AML report are scheduled until then.

The Block reached out to the European Parliament for comment.


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