EU pushes for tighter regulations on anonymous crypto transactions

2023-03-30 by

Hugues Marty

In the wake of the demise of FTX and other crypto platforms, or arguably using it as a motive to push through policies that have long been on the table, European Union lawmakers have taken a significant step towards strengthening regulations on cryptocurrency by adopting new draft legislation, supposedly aimed at combating money laundering and terrorist financing. The legislation, which received 99 votes in favor, eight against, and six abstentions, imposes a cap of 1,000 euros on anonymous cryptocurrency transfers. The limit applies to crypto asset transfers when a customer cannot be identified, and cash transactions will also be capped at 7,000 euros. The Anti-Money Laundering and Countering the Financing of Terrorism package is set to be confirmed in a plenary session in April, after which negotiations on the final shape of the bills will begin.

The European Anti-Money Laundering Authority (AMLA), which was formed in June 2022, will eventually be responsible for enforcing the rules. Emil Radev, co-rapporteur for the AMLA, emphasized the importance of the new authority cooperating closely with national supervisors and directly supervising the riskiest crypto asset service providers and financial sector companies operating in several member states.

Entities such as banks, asset and crypto asset managers will be required to verify their customers’ identity, what they own, and who controls the company. They will also need to establish specific risks associated with money laundering and terrorist financing within their business area and relay this relevant information to a centralized registry.

The European Banking Federation (EBF) released a paper on March 28 outlining its vision for the digital money ecosystem of the future and the retail digital euro in particular. The EBF proposed a multi-tiered model for the digital euro: The European Central Bank (ECB) would have a role in interacting with the Single Euro Payments Area, while an “Industry Level B” would be developed and operated by the private sector.

As stricter rules are being implemented by national and supranational organizations, the future of anonymity and the absence of intermediaries in the crypto and blockchain world is becoming uncertain. With the European Union enforcing a cap on anonymous crypto transfers, will this be a precursor to more regulations in the industry worldwide? Or will the decentralized nature of blockchain technology find a way to balance anonymity with compliance, allowing for a secure and transparent future of finance? Only time will tell.

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