Italy strengthens supervision of digital assets with enforcement of the EU Transfer of Funds Regulation (TFR)

More scrutiny to counter money laundering
For years, regulators have feared that cryptocurrencies represented an easy way for money launderers, tax evaders and criminal networks to move funds anonymously. The new TFR rules, part of the EU's broader anti-money laundering package, aim to close these loopholes.

According to FinCrime Central, Italy's Ministry of Economy called the legislation "a bold step towards the harmonisation of AML practices across Europe". The law obliges crypto companies to track and store the names, addresses, and account details of both senders and recipients, regardless of the amount of the transaction.

"Cryptocurrencies can no longer be the safe haven for anonymous transfers as they once were," said an Italian government spokesperson.

What the legislation provides for

The requirements are very broad. Unlike cash transactions, which often have thresholds for mandatory reporting, the TFR applies to all crypto transfers, even those of just a few euros.

As Flexi explains, VASPs and CASPs must:

• Collect sender and receiver identification data for each transaction.
• Verify and retain the information for at least five years.
• Share data with authorities upon request.

This approach, sometimes called the 'travel rule', reflects international standards promoted by the Financial Action Task Force (FATF).

Impact on the Italian crypto market

Italy is one of the most active crypto markets in Europe, with more than 4.8 million citizens holding digital assets in 2024, according to Coinpedia. For exchanges, wallet providers and custodians, TFR compliance poses a significant operational challenge, as it requires new systems for collecting, verifying and storing data.

Non-compliance could result in heavy penalties, suspensions or even the loss of a licence. Although such measures increase costs, regulators argue that they are necessary to improve transparency and reduce money laundering risks in the sector.

Part of the wider European MiCA framework

The TFR is not isolated: it is part of the broader Regulation on Crypto Assets Markets (MiCA), fully applicable from the end of 2024. Together, MiCA and TFR constitute what many analysts describe as the most comprehensive regulatory framework on cryptocurrencies in the world.

According to legal experts, these rules give CONSOB and the Bank of Italy greater supervisory powers over crypto activity, including control over issuers of stablecoins and custodians of digital assets (CMS Law).

Looking to the future

Reactions to the new rules are mixed. Some industry leaders fear that excessive regulation will push small operators out of the market. Others, however, argue that transparency is necessary for cryptocurrencies to gain mainstream legitimacy.

As Andrea Rossi, a Roman lawyer specialising in blockchain, told FinCrime Central:

The era of anonymity in crypto transactions is ending. The challenge now is to balance transparency and privacy rights.

For Italy, the TFR represents not only a regulatory change, but also a declaration of intent: crypto can flourish, but only within a system that puts security, responsibility and consumer protection first.