Common sense regulations could mean the end of some of the sketchier cryptocurrency exchanges on the market. Outfits like Binance are going to have a very hard time maintaining their market share once the European Union’s Fifth Anti-Money Laundering Directive (MLD5) kicks in, forcing them to start respecting compliance or lose millions of European customers.
The MLD5, which must be enforced by January 10, 2020, requires exchanges to start following many of the same rules that banks have adhered to for decades. Importantly, it will impose Anti-Money Laundering (AML) regulations, Know Your Customer (KYC) rules, limit certain types of virtual currency, and much more.
All three of those will have a big impact on many exchanges, but maybe none more so than the world’s leader in exchange volume, Binance. That site, which allows users to anonymously exchange as much as 2 Bitcoin Core (BTC) daily, is a ripe target for criminals to launder their funds. Any bad actor can make an account without identification, so long as they stay under that rather hefty limit, and do what they want with their funds. That’s a situation that is begging for the type of regulation MLD5 will bring.
When these new regulations kick in, and other states like the US start imposing common-sense laws as well, sites like Binance will have to drastically lower limits for users they have yet to identify. If they don’t, they lose hundreds of millions of potential users.
Alt-coins won’t escape the cross-hairs of regulators either. The MLD5 will clearly define virtual currencies as well, and many of the speculative offerings available on shady exchanges like Binance will likely fall outside of what’s permitted.
The implications of these rules will be devastating if exchanges don’t get out of the speculative, gambling type trade they’ve engaged in up to now. Many useless altcoins will need to be dropped, and millions of customers will need to begin complying with AML or KYC rules.
That devastates the market that Binance has thrived in, but it’s only right. The industry needs to grow up, and these rules will ultimately make it a more responsible, grown up space.
New to Bitcoin? Check out CoinGeek’s Bitcoin for Beginners section, the ultimate resource guide to learn more about Bitcoin—as originally envisioned by Satoshi Nakamoto—and blockchain.