EU Parliament Votes in Favour of Stricter Crypto Regulation

EU Parliament Votes in Favour of Stricter Crypto Regulation

It seems that the crypto sector has finally caught an eye of the European Parliament as the regulators voted for increased regulation towards wallet providers and digital currency exchanges. The latest measures come as a part of the updated EU Anti-Money Laundering Directive.

The vote in question was whether to support an agreement with the European Council signed in December 2017. The agreement partly aimed to prevent the use of digital currencies in terrorism financing and money laundering. Members of the European Parliament (MEPs) voted almost unanimously with 574 votes in favour of the regulation and only 13 against, with 60 absentees.

The new regulations aim to address the “risks linked to virtual currencies” by abolishing the anonymity, which is so inherent to cryptocurrencies. According to the new laws, crypto exchanges and custodian wallet providers will have to verify the users before accepting them on their platform. This process will include numerous due-diligence procedures, such as identity verification. In addition, all crypto platforms will have to register with authorities to be eligible to offer their services.

Another change targeted holders of prepaid and virtual cards as the threshold for their owner’s identification has been lowered from the current €250 to €150. Officials claim the reason for the introduction of new regulations are a response to the terrorist attacks in Paris and Brussels as well as Panama Papers leaks.

Krišjānis Kariņš, a MEP and member of the special committee on financial crimes and tax evasion claimed that “Criminal behavior hasn’t changed. Criminals use anonymity to launder their illicit proceeds or finance terrorism. This legislation helps address the threats to our citizens and the financial sector by allowing greater access to the information about the people behind firms and by tightening rules regulating virtual currencies and anonymous prepaid cards.“

His colleague Judith Sargentini added that “We lose billions of euros to money laundering, terrorist financing, and tax evasion – money that should go to fund our hospitals, schools, and infrastructure. We introduce tougher measures, widening the duty of financial entities to undertake customer due diligence.“

Crypto policy in the EU is still in its infancy as it is governed by uncoordinated decisions on a national level. Cryptocurrency rates vary wildly from 0 to 50 percent with some countries partially legalizing digital currencies in order to gain tax benefits. The only coordinated move so far has been the signing of the Declaration on the Establishment of a European Blockchain Partnership earlier this month by 22 EU members. However, this document does not even cover cryptocurrencies.

The frauds and illicit activities regarding virtual currencies is a well-documented issue. A recent study by a blockchain analysis startup Elliptic and Center estimates there has been a fivefold increase in the number of large-scale criminal operations performed on the blockchain-based platforms between 2013 and 2016.

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