The EU Council Recently Passed a Directive That Will Have an Impact on the Cryptocurrency Industry.
The European Union has updated the anti-money laundering law to solve the “risk associated with virtual currency” and other issues. The new rules aim to reduce the anonymity of users and transactions. This is a requirement of the KYC process and must be implemented by a cryptocurrency trading platform. At the same time, a senior official of the European Central Bank also called for banks to isolate cryptocurrency operations from traditional finances.
Europe launched the “Action Plan” after the terrorist attack in 2016. The “strengthening of the EU anti-money laundering and terrorist financing rules” has become part of the purpose of the “action plan.”
The press release issued by the Council of the European Union shows that the new directive stipulates that “criminal financing activities will be cut off without hindering the normal operation of the payment system”.
On Monday, the European Parliament and the European Council passed the 2015/849 amendment to the EU Directive issued on May 20, 2015 at the General Affairs Council meeting, but did not discuss the amendment further.
Prior to this, the European Parliament signed an agreement in December last year that aims to “tighten cryptocurrency”, and in April this year, the members of the European Parliament voted to support the agreement.
The major changes in the new directive include the elimination of the anonymity of cryptocurrency traders and cryptocurrency-related transactions by taking relevant measures to address the “risk associated with virtual currency”. According to the new directive, exchange service providers and wallet escrow service providers between virtual currency and fiat currency are obliged to identify suspicious activities. The authorities should monitor the use of cryptocurrency on these platforms. The national financial intelligence agency should have a way to collect Related information and associate these transaction addresses with the owner.
Although the measures in the directive can not completely solve the problem of anonymity, and because of the actual situation in different countries, these measures should be revised in more detail by each member state. Each member country will have 18 months to incorporate the provisions of the directive into the national regulatory framework. Once the problem arises and something happens, the European Union’s cryptocurrency transactions will be forced to comply with stricter AML and CTF guidelines, including full client verification on the platform.
Some companies have already taken measures against the new directives. Local Bitcoins, a well-known Helsinki-based exchange, has recently updated its terms of service. The company said that this change was mainly implemented in response to the new EU regulatory requirements. The company emphasized the identification requirements and warned users that in some cases they will require users to submit identity documents, such as trading under a limited number of conditions, or the account is subject to hacking and fraud investigations. The new terms of service will take effect this month.
The EU Council stated:
“Virtual currency and electronic currency should not be confused.”
The directive states that while cryptocurrency technology can be used as a means of payment, they can also be used in other ways and should have broader applications such as exchange, investment, and value storage.
The directive defines “virtual currency”. Virtual currency is defined as:
“Numerical representation of value not issued or guaranteed by the central bank or public authority.”
The directive also says that the cryptocurrency does not depend on the legal currency and does not have legal status as a legal currency, but it can be accepted by natural or legal persons as an exchange and shows that cryptocurrencies can be transmitted, stored and traded electronically.
The directive identifies the wallet hosting service provider as:
“An entity that protects private keys on behalf of clients to hold, store, and transfer virtual currencies.”
National authorities should ensure that they are registered or licensed with the providers of cryptocurrency transaction services.
The directive modifies anonymous prepaid bank cards to “eliminate terrorist financing methods”. The threshold for mandatory confirmation of holders has been reduced to 150 euros. In the case of remote payment transactions exceeding 50 euros, authentication is also required.
Brussels is taking action to strengthen the regulation of encrypted transactions, and Frankfurt said that the entire cryptocurrency business should be isolated from traditional finance.
A Reuters report shows that a senior representative of the European Central Bank has stated that banks should separate virtual currency-related businesses from other businesses, and even use capital to reduce risks. The official also called for the supervision of cryptocurrency companies, tokens, exchanges and any other banks or clearing houses involved in these matters.
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