More regulation coming to EU for cryptocurrencies

More regulation coming to EU for cryptocurrencies

With cryptocurrencies under the spotlight on a consistent basis and several countries imposing bans or restrictions on trading, the situation is just about to get a little bit harder for traders and investors in the European Union. The European Council has just introduced a directive that would affect the crypto sector in Europe since it would be clamping down on anonymity in the sector—something which crypto investors hold rather dear.

The document, approved by the European Council this week, attempts to update legislation concerning anti-money laundering and to address the risks linked to virtual currencies, amongst other issues. These new rules are intended to drastically reduce anonymity for both users as well as transactions. Anonymity is one of the key advantages of certain digital currencies such as Monero and Cardano, so these new rules will undoubtedly have a negative effect on such currencies. Amongst the procedures to be implemented, the document calls for Know-Your-Customer (KYC) procedures that the platforms will have to introduce.

The document is titled, “Strengthening EU rules to prevent money laundering and terrorism financing,” and has been declared as the main thrust for changes which form part of the action plan that was launched after the terrorist attacks that took place in Europe in 2016. The ambitious document sets out to close down criminal finance without the hindering of normal payment systems functioning.

The amendments to EU Directive 2015/849 of the European Parliament and the Council of May 20, 2015, were adopted at a meeting of the General Affairs Council on Monday and were approved without a discussion. This move follows an agreement with the European Parliament which dates back to December 2017. In April, MEPs had also voted to support the deal that brings cryptocurrencies under much more stringent regulation.

The main change in this legislation involves addressing the “risks linked to virtual currencies.” These risks revolve around the anonymity of crypto traders and crypto transactions which will now have their anonymity severely reduced.

The law obliges exchange service providers as well as wallet custodians who exchange in transactions between fiat and virtual currencies to report any suspicious transactions. The directive also empowers authorities to monitor cryptocurrency use through these platforms with national financial intelligence units also being allowed access to information whilst allowing them to link crypto currency addresses to their owners.

In a statement, Bulgaria’s Minister for Finance and current EU Council President Vladislav Goranov said, “These new rules respond to the need for increased security in Europe by further removing the means available to terrorists… They will enable us to disrupt criminal networks without compromising fundamental rights and economic freedoms.”

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