What Does the Transfer of Funds Regulation Mean for You and Your Digital Assets?

The Transfer of Funds Regulation (TFR) is a regulation regarding the transfer of digital assets, like bitcoin, within the European Union.
Its purpose is to enhance the traceability of crypto transactions to prevent money laundering and terrorism financing and to create and maintain a trustworthy and safe financial ecosystem for customers like you, and crypto businesses in the European Union.

The Transfer of Funds Regulation (TFR) requires exchanges, like Binance, to verify the information of the originator (the person sending the funds) and beneficiary (the person receiving the funds).

Your exchange also needs to store this information securely for a period of time (usually 5 years). If necessary, authorities can access this information if they suspect illicit activity. Additionally, if suspicious activity is suspected, your exchange has to report this to the authorities.

When sending digital assets to or from an exchange, you need to provide information before being allowed to transact, and when using a self-hosted wallet (a hardware wallet), you will be required to prove that the wallet belongs to you*.

*A self-hosted wallet proof will be requested if you send or receive more than EUR 1000 to or from your own wallet using an exchange or if there is a suspicion of illicit activity.

If you are the originator (sending the assets), you need to provide the below information to your exchange (Binance):

• Your full name,
• Your wallet address.
  This is the address where the assets need to be sent, for example:
  bc1qa4k4jcrl04fymdlpx7qpp0jg0y82u9yz3h47ua,
• Your crypto asset account number (your exchange will provide this information).
• Your address.
  This must include the name of the country where you reside, your official personal document number, and your customer identification number (your exchange will provide this information), or alternatively, your date and place of birth.

As well as information on the person (beneficiary) receiving the assets. This includes:

• The beneficiary’s full name,
• The beneficiary’s wallet address.
  This is the address where the assets need to be sent, for example:
  bc1qa4k4jcrl04fymdlpx7qpp0jg0y82u9yz3h47ua
• The beneficiary’s crypto asset account number (their exchange will provide this information to them)
• The name of the exchange that will receive the assets and its LEI number.

LEI numbers are easy to obtain. If you know the name of the exchange receiving the funds, type it into Google, followed by the location and LEI number, for example, Kraken Netherlands LEI number.

If you are the beneficiary (receiving the assets), you need to provide the information below to the person sending you your digital assets; without this information, their exchange cannot process the transaction.

• Your full name,
• Your wallet address.
  This is the address where the assets need to be sent, for example:
  bc1qa4k4jcrl04fymdlpx7qpp0jg0y82u9yz3h47ua,
• Your crypto asset account number (your exchange will provide this information),
• The name of the exchange that will receive your assets and its LEI number.

When transferring between an exchange, like Binance and a self-hosted wallet (hardware wallet), you must provide the information mentioned above.

Additionally, you may be asked to prove that you control the wallet from which the funds originate. This will be requested if:

• you send or receive more than EUR 1000 to or from a wallet using an exchange or
• you send or receive multiple smaller transactions that equal or go over EUR 1000 to or from a wallet using an exchange

This process is done digitally. There are 4 ways to do this, but the safest and most popular 2 options are via AOPP and a Satoshi Test.

There are 4 ways to determine wallet ownership, with AOPP and the Satoshi Test being the most secure and easiest methods for wallet owners.

Invented by 21 Analytics, AOPP eliminates the manual element in self-hosted wallet (hardware wallet) proofs. Here’s how it works:

• Initiate a transaction with your exchange,
• You will receive a link to the AOPP Portal. Open this link and select your wallet type,
• After selecting your wallet type, a pop-up will appear directing you to your wallet with further instructions on how to complete the ownership proof,
• Complete the prompts per your wallet,
• Once completed, you will receive 2 confirmation messages:
  1. One message will appear within your wallet confirming the address is now ready for transacting.
  2. The second message will automatically appear in the AOPP Portal, confirming your address has been successfully registered and that you are able to transact.

21 Analytics has simplified the user experience of a traditional Satoshi Test with the Satoshi Test portal. This is how it works:

• Initiate a transaction with your exchange,
• You will receive a link to the Satoshi Test Portal. Using this link, you will find the amount to transfer, which address to transfer from and to, and a time limit to complete the transaction,
• Complete the Satoshi Test using the data received in the link (transaction amount, address, etc.),
• After completing the transaction, submit your transaction ID via the Satoshi Test Portal link,
• After submitting, you will receive a message confirming that your address has been successfully registered, which means you are now able to transact.

Your exchange may ask you to update your personal information regularly. This is normal. By keeping your data up to date, you can prevent transaction delays.

In rare instances, you may not be able to transfer from your exchange to another exchange within the EU. This is most likely due to the “grandfathering period”. To avoid this issue, check with your exchange before transacting to clarify if there are any jurisdictions they are not currently transacting with.