Legislative changes with consequences for the crypto market? EU will stop money laundering using cryptocurrencies | 06/07/22

• EU legislation under discussion
• Obligation to report crypto transactions
• Artificial complication of crypto trading

The EU wants to stop money laundering using cryptocurrencies

With the increasing adoption of cryptocurrencies like Bitcoin, Ether & Co., institutions and authorities are increasingly focusing on digital coins. Regulation of cyber currencies has recently been a regular topic of discussion in public institutions worldwide. Frequent criticism of internet currencies is on the one hand the high power consumption that arises from mining some of these coins, on the other hand the lack of protection of investors and the risk of money laundering, tax evasion and terrorist financing.

The European Parliament will now put an end to the possibility of using cryptocurrencies for money laundering. The draft law “Markets in Crypto-Assets (MiCA)” is intended to serve this purpose. Most recently, in March, MPs voted against a passage that would have resulted in a ban on “unsustainable” crypto services. As a result, Bitcoin and other computationally heavy coins based on the “Proof of Work” concept would no longer be allowed in the EU. Since then, the draft MiCA has been discussed in Parliament, the Council and the Commission, as reported by “BTC-ECHO”.


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The limit for transaction reports must be lowered

Part of the draft law is also the extension of the “Transfer of Funds Regulation” (TFR), the portal continues. As part of the “Travel Rule”, financial transactions over 1,000 euros must already be reported to the tax authorities, which is seen as a success in the fight against money laundering. However, should this provision be extended to include crypto companies, the reporting limit would be eliminated, as the crypto portal BeInCrypto reports. This would require trading exchanges to report all crypto transactions to the authorities, no matter how low they are.

Legislative changes can pose challenges for crypto exchanges

This means that crypto companies have to save the transactions that have been completed, which presents new challenges, as Robert Kopitsch from the association “Blockchain for Europe” emphasizes to BTC-ECHO. “What happens to all the data collected and what is it used for? It is not clear today what will happen to it and who will process this excess information.”

Blocking of crypto payments

In addition, the new rules could also lead to slowdown in payment processes, fears Ajinkya Tulpule, who works on the crypto exchange bitFlyer. Users must first be identified before transactions can be performed. But if it depends on these know your customer processes (KYC), payments can be suspended until the issues are resolved, the compliance manager told BeInCrypto. Moreover, the information structure is not yet designed for such reporting. “There are some coins that are not tracked by transaction monitoring systems,” Tulpule said. This means that providers must first comply with the new set of rules before a smooth implementation can be guaranteed.

Crypto is not the enemy

Marc Toledo, CEO of the Belgian crypto exchange Bit4You and director of the Blockchain Association of Belgium, also considers the EU’s approach to be impractical, as he explains to “CoinDesk”. “Full implementation of the ‘travel rule’ will prove difficult as not every technology allows the storage and transmission of this particular information. It would be much easier to set up a global register of identified addresses, a technique also used in banking,” says he. suggests the expert. It is important to keep in mind that cryptocurrencies are not established as an antagonist in the fight against money laundering. “The enemy is and remains anonymity and poorly implemented KYC procedures. Regulators need to coordinate closely with crypto exchanges to find solutions that increase security without harming the future and competitiveness of the European crypto industry ‘Toledo continued.

Unequal competition conditions are feared

According to the portal, however, proponents of adaptation argue that even small amounts can be used to fund terrorism or money laundering and then arrive bundled elsewhere. “It is always good to take further steps against money laundering and terrorist financing, but it is unfortunate that a ‘traditional’ approach to risk management is being taken in a new sector,” said Olivier van Duijn, CEO of the Dutch crypto exchange. LiteBit leader. in conversation with CoinDesk. “These policies are implemented earlier in some countries or regions than others. It can create unequal rules of the game.”

According to BeInCrypto, a decision on the draft law is expected in the coming weeks.

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