Legal Round-Up #20

Adam Berker

The 20th issue of our legal round-up (11/04-15/04).

The 20th issue of our legal round-up (11/04-15/04).

EU Bans High Volume Crypto Transactions for Russian Residents

According to the latest package of sanctions, EU-based crypto companies shall cease providing crypto-asset wallet, account or custody services to Russian residents if the total amount of their used virtual currency exceeds EUR 10 000. 

It is likely that companies that do not want to cease relations with their customers will transfer their Russian clients to non-European entities’ accounts, considering that most exchanges usually provide their services through several entities, incorporated in different jurisdictions.

EU Parliament Passed New Rules that will Disclose Crypto Owners

On March 31st, the European Parliament’s Committee on Economic and Monetary Affairs (ECON) and the Committee on Civil Liberties (LIBE) voted for amendments to the Regulation on information accompanying funds transfers. New rules will require crypto service providers to verify both the sender and the beneficiary of a crypto transfer made through their platform. Additionally, The providers should report transactions exceeding 1000 EUR to authorities. 

The amendments are yet to be approved by the European Parliament and then by the trilogue between the European Parliament, Commission and Council.

The introduction of the above-mentioned changes is to comply with the Financial Action Task Force’s (FAFT – an international financial supervisory organisation) Travel Rule. Nevertheless, this approach may considerably affect noncustodial wallets, since centralised exchanges may be forced to prohibit transactions from unidentified sources.

Decentralised exchanges and DeFi projects may face problems due to the regulations. They will have to add verification mechanisms to their platforms, probably decreasing customer conversion rate.

Georgia Plans to Regulate Crypto

The National Bank of Georgia announced that it had developed a draft bill for the crypto industry that will be regulated in full accordance with the Financial Action Task Force’s recommendations.

Currently, private banks in Georgia consider customers who hold digital assets as “high risk” clients, which creates obstacles for them to receive fiat gains to bank accounts. Even if the new legislation is unlikely to change this approach, it will establish a legal basis for proving the source of funds gained by banks’ clients.

The UK Takes Steps Toward Crypto Adoption

As a result of the Consultation and Call for Evidence on the regulatory approach to crypto-assets, stablecoins, and distributed ledger technology, HM Treasury issued its proposal for regulation. The document includes, inter alia, a conclusion that some stablecoins may become a widespread means of payment and deliver improvements in payments transactions – especially for cross-border transactions. 

Among other plans, HM Treasury also announced an establishment of a Cryptoasset Engagement Group to explore how the tax system may be used for crypto development in the UK, establishing a financial market infrastructure sandbox.

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