MEPs have backed the first piece of legislation on tracing transfers of crypto-assets, such as bitcoin and other electronic tokens.

The text of the new law was provisionally agreed by the European Parliament and EU Council negotiators in June last year.

Today (20 April), MEPs overwhelmingly backed the measures, with 529 voting in favour and 29 against.

The law aims to ensure that transfers of crypto-assets, as is the case with any other financial operation, can always be traced and suspicious transactions blocked.

‘Travel rule’

The so-called ‘travel rule’, already used in traditional finance, will in future cover transfers of crypto-assets. Information on the source of the asset and its beneficiary will have to ‘travel’ with the transaction, and be stored on both sides of the transfer.

The law would also cover transactions above €1,000 from so-called self-hosted wallets (a crypto-asset wallet address of a private user) when they interact with hosted wallets managed by crypto-assets service providers.

The rules do not apply to person-to-person transfers conducted without a provider, or among providers acting on their own behalf.

Safeguards

MEPs also approved new common rules, known as MiCA, on the supervision, consumer protection and environmental safeguards of crypto-assets – including crypto-currencies.

The draft law agreed last year includes safeguards against market manipulation and financial crime.

MiCA will cover crypto-assets that are not regulated by existing financial-services legislation. It includes measures on transparency, disclosure, authorisation, and the supervision of transactions that will affect those issuing and trading crypto-assets.

Risks

The new law aims to better inform consumers about the risks, costs and charges linked to operations involving crypto-assets.

The agreed text includes measures against market manipulation, and to prevent money-laundering, terrorist-financing and other criminal activities.

In a bid to reduce the high carbon footprint of crypto-currencies, significant service providers will also have to disclose their energy consumption.