Expanding “Travel Rule” To Almost All European Crypto Transactions Could Stifle Innovation In The Region’s Digital Asset Industry

European Parliament has proposed an expansion of the “travel rule” to all crypto transactions valued at 1000 euros or more. The travel rule stipulates that all banks and payment companies keep records of data that “travels” between payers and recipients. This information then needs to be made available to the authorities. This travel rule proposal is quite similar to propositions from the Financial Action Task Force (FATF), an intergovernmental institution founded by the G7 group of countries to combat money laundering and terrorist financing.

The FATF seems to have had influence over European policy makers, according to Thomas Spaas, a Belgian attorney who specializes in crypto regulation. Spaas seems wary of just how strong the FATF’s influence has been on members of the European Parliament.

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Belgian member of parliament (MEP) Assita Kanko, member of the right-wing European Conservatives and Reformists group, and Spanish MEP, Ernest Urtasun, member of left-leaning Greens-European Free Alliance, proposed the expansion of the travel rule on February 9. The proposal from Kanko and Urtasun would require every European financial institution that facilitates crypto transactions to report information including the sender’s address, passport number, and wallet address. It would also require that the name and wallet of the recipient of the transaction be disclosed. The regulation was proposed independently of the FATF, yet it closely resembles the parameters that the FATF has tried to establish in other jurisdictions.

Spaas sees the expanded travel rule as “another obstacle for new entrepreneurs to overcome,” according to CoinDesk. Heightening know your customer (KYC) rules and reporting for crypto exchanges has the potential to stifle innovation in the space. Burdensome KYC requirements can bury crypto start-ups in paperwork and create what Oliver van Dujin, CEO of Dutch crypto exchange, LiteBit, terms an “uneven playing field.”

Most entrepreneurs in the crypto space want to play by the rules; they would just like for the rules to be sensible and not overbearing. Marc Toledo, managing director of Bit4You, Belgian crypto exchange, and director of Blockchain Association of Belgium, has proposed setting up a global registry of identified wallet addresses, akin to a system that already exists in traditional banking.