Recently, 21 Analytics had the pleasure of speaking with Delphine Forma about what lies ahead for crypto regulation in the EU. The Travel Rule solution providers asked the seasoned compliance expert what she envisions for the future of the Travel Rule and broader EU regulatory developments.
In the interview below, Delphine shares her predictions for what might come after the implementation of the Transfer of Funds Regulation (TFR).
Regulatory Changes for the EU’s Travel Rule
According to Delphine, while sweeping changes to the TFR may not be around the corner, certain developments could shape its evolution over time.
Before diving into her predictions, Delphine reminded us of an important distinction: MiCA and the TFR are separate regulations.
- MiCA (Markets in Crypto-Assets Regulation) creates a harmonised EU framework for crypto-asset markets.
- TFR (Transfer of Funds Regulation) focuses on payer/payee information for crypto and fiat transfers to combat money laundering and terrorist financing.
It’s also essential to consider that AML is currently governed by AMLDs and national rules—and will transition to the new EU AML Regulation in 2027.
What Changes Could Affect the TFR?
Delphine: In 2023, the FATF proposed revisions to Recommendation 16, potentially requiring more detailed information on beneficiaries. While immediate amendments to the TFR are unlikely, any FATF updates may prompt future changes to EU data requirements.
We may also see regulators issue more guidance to help CASPs address practical challenges, along with best practice publications from industry groups and trade associations.
Is a “MiCA 2” on the Horizon?
Delphine: Right now, the EU is focusing on enforcing MiCA and the TFR, rather than introducing new frameworks. A “MiCA 2” isn’t on the agenda at present, though it’s not entirely off the table. In the meantime, certain provisions may be refined as technologies and the market mature.
How Might DeFi Influence Future Regulation?
Delphine: A recent report from ESMA and the EBA shows that DeFi currently makes up just 4% of the global crypto market. While EU adoption is above the global average, it still lags behind the US and South Korea. Given this, DeFi is unlikely to trigger immediate regulatory change, but it will likely shape future priorities.
“I think the next focus of the regulator will be on decentralised finance, lending, borrowing, staking, and similar activities.”
Delphine’s Take on What’s Next
Significant TFR changes may not be imminent, but FATF-driven developments and enforcement efforts could bring targeted updates. For now, with MiCA and the TFR still fresh, regulators are prioritising implementation and enforcement. And that’s no small task, especially with other major regulations like the AI Act and DORA also in play.
The Travel Rule is still a work in progress. Loopholes and grey areas need addressing to ensure effective, consistent compliance across the EU.
TFR Loopholes and Compliance Challenges
Is Counterparty CASP Identification Still a Challenge?
Delphine: Yes. There’s still a lack of clarity around identifying counterparty CASPs and determining the necessary due diligence. This is particularly complex in cross-border transactions or when dealing with CASPs in jurisdictions lacking Travel Rule requirements.
Even within the same group of entities, identifying the correct one can be tricky. Guidance on the expected due diligence levels would help, especially for CASPs dealing with global counterparties. There’s also room for the industry to collaborate on setting standards, like those developed by GDF.
How Should CASPs Deal with Non-compliant Counterparties?
Delphine: More guidance is needed on this. Key questions include:
- When should a relationship with a non-compliant counterparty be terminated?
- How can crypto deposits be controlled to ensure compliance? One approach could be using an intermediary wallet and crediting customer accounts only after verification.
- Can funds be returned to the originator? And if so, to whom, and how, if the required data isn’t available?
- What happens to funds that can’t be returned?
These uncertainties create operational risks, and clearer regulatory direction is essential.
What about Entities Not Subject to the TFR?
Delphine: Definitely a common concern. Many CASPs are unsure how to handle interactions with entities outside the scope of the Travel Rule, like DeFi platforms, self-hosted wallets, or those in non-compliant jurisdictions.
A risk-based approach is recommended, using blockchain analytics and transaction monitoring tools to mitigate exposure.
What’s the Industry’s Responsibility Here?
Delphine: Regulations should remain principle-based, leaving room for the industry to develop operational standards. Collaboration with regulators, innovation, and knowledge sharing across the private sector will be key to effective implementation of the Travel Rule.
Is the Travel Rule Enough?
Delphine: The Travel Rule is a useful tool, but not a silver bullet.
“As I’ve said before, I don’t believe the Travel Rule was strictly necessary. If the aim is to combat financial crime, blockchain analytics and transaction monitoring already provide deep insights.”
Its primary benefit may be for law enforcement—helping with prosecution—rather than improving compliance. And unlike traditional finance, crypto already offers greater transparency through blockchain traceability.
That said, the next step is for the DeFi space to proactively adopt controls and best practices. Its decentralised nature presents challenges, but also opportunities to strengthen defences against illicit use.
We now have tools to reduce criminal misuse, let’s keep improving them. This isn’t the end of the journey, but the beginning of building resilient financial ecosystems, centralised and decentralised alike.
Join Delphine’s Crypto Compliance & Legal Telegram group to stay connected.
About Delphine Forma
Delphine Forma is the Policy Head for Europe at Solidus Labs. She has experience at BitMEX and leading banks in the UK. She holds two master’s degrees in law and graduated from Sciences Po.
She is also the founder of the Crypto Compliance and Legal Telegram group, an advisor to startups across Europe and Switzerland, an ambassador for the Association of Women in Crypto and the Global Blockchain Business Council (GBBC), and the host of the MiCA Masters podcast.
Read more articles by Delphine:
- EU Compliance Expert Explains MiCA’s Grandfathering Period
- The TFR Is Live – What Comes Next for CASPs?
Source: 21 Analytics