According to recent media reports, six European countries led by Germany are working on creating an anti-money laundering (AML) agency that would bring the cryptocurrency market under its jurisdiction. Details are still scarce, but the initiative is understood to involve Germany, Spain, Austria, Italy, Luxembourg and the Netherlands. The group is working on the “reference and design” of a new international anti-money laundering watchdog that will focus specifically on cryptocurrencies, with the EU’s key executive body, the European Commission, set to be the main forum for discussions. How will this move affect the European crypto space?
Responsibilities of Regulators
The goal of the new working group is to “cover the highest-risk cross-border entities among banks, financial institutions and crypto-asset service providers.” For now, the initiative is still awaiting official consideration. Christian Toms, a partner in Brown Rudnick’s litigation and arbitration practice group in London, told Cointelegraph:
"Negotiations around its terms of reference are still ongoing, and as part of these negotiations - possibly in light of growing awareness of the uses and risks of cryptocurrencies - it is understood that specific discussions are underway to enable the agency to The role of regulating cryptocurrencies and related institutions becomes a key part of its mandate, and may even articulate these matters in its fundamental principles.”
This is not the first time the media has speculated about the idea of an EU encryption task force. In July 2021, Reuters reported, citing leaked documents, that the European Commission proposed the establishment of a new anti-money laundering agency that would become the "core" of the entire European cryptocurrency regulatory framework. The mentioned plans also include new requirements for virtual asset service providers in line with strict EU data collection standards.
governed by the order
A common criticism of U.S. cryptocurrency regulation is that it relies on agencies such as the Securities and Exchange Commission, the Commodity Futures Trading Commission, and the Financial Crimes Enforcement Network. However, there is also no single authority in Europe – just a patchwork of various national institutions, many of which have expertise in matters of the digital economy. This makes the creation of a centralized regulator all the more necessary rather than a hostile move.
The reason for the current lack of such a body is that the EU's anti-money laundering rules are set through directives, which are part of legislation and are not automatically mandatory, but need to be transposed into national law by each member state. Thibault Verbiest, director of fintech and crypto finance at law firm Metalaw, explained to Cointelegraph:
“Although Anti-Money Laundering Directive No. 5, which came into force on January 10, 2020, has been fully converted by almost all member states, within its scope crypto service providers (in particular exchanges and custodial wallet providers) are listed as Obligated entities, ... in the absence of a pan-EU body, have to rely on national regulators to enforce anti-money laundering rules.”
The state of Europe's anti-money laundering enforcement came under heavy criticism a few years ago when separate country-level investigations proved that between 2007 and 2015 more than 200 billion euros (about $227 billion at the time) of non-resident funds had passed through Denmark's largest Estonian branch of the bank flows.
Changes in the Regulatory Landscape
With the arrival of new enforcement powers, we may see rapid centralization (and clarity) of the EU cryptocurrency framework. This could reduce the competitive advantage of certain apparently friendly jurisdictions as, in Verbiest's view, differences in rule translation, interpretation and enforcement would be eliminated. It will be more difficult, if not impossible, for EU member states to take a different position from other countries:
“Surveillance activities and AML/CFT rules across the EU will be harmonized and integrated. … With the introduction of stricter reporting requirements and better cooperation between member states on AML/CFT issues, regulators will It is desirable to create the best possible cryptographic transaction graph to identify transactions related to illicit activity and limit erosion of the taxable base.”
As the issue of money laundering (not necessarily related to cryptocurrencies) is still very important, the main trend of rapid consolidation of regulation will continue. According to Toms, anti-money laundering rules and regulations have generally been tightened with each new iteration of EU regulations as the fight against black money intensifies:
“The current conflict in Ukraine and sanctions against Russia could further push for a general tightening of regulation if there are concerns that certain parties involved may now be more aggressive in seeking increasingly new ways to circumvent AML regulation. … already on the alert in the EU Cryptocurrencies in sight, may well find themselves drawn into this situation.”
tough situation
Another major factor is the development of central bank and state-issued digital currency projects, which may affect the regulatory and supervisory environment, and it is difficult for the crypto industry to be optimistic. If this trend spreads across Europe, "unregulated" crypto companies and currencies may become increasingly marginalized and viewed as a form of investment by those who for whatever reason do not want to use a state-mandated CBDC. choose.
However, this dark scenario is far from guaranteed, given the growing adoption of cryptocurrencies at both the retail and institutional levels, and the growing number of financial giants involved in cryptocurrencies in some way.
Ultimately, Europe may take a tougher stance on cryptocurrencies, as executive decisions in Europe may come under less parliamentary pressure than in the United States. The European Union is likely to take an increasingly tough stance on policing crime and consumer protection, while cryptocurrencies remain viewed with suspicion.
But the game is not one-sided: after all, the crypto industry will have to figure out how to manage transparency and know-your-customer issues in a decentralized world.
Cointelegraph Chinese is a blockchain news information platform, and the information provided only represents the author's personal opinion, has nothing to do with the position of the Cointelegraph Chinese platform, and does not constitute any investment and financial advice. Readers are requested to establish correct currency concepts and investment concepts, and earnestly raise risk awareness.
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