The EU Council adopted a Directive concerning the work of cryptocurrency companies in Europe. The document updates the legislation of the European Union to combat money laundering, particularly in «risks associated with virtual currencies». New rules aimed at reducing the anonymity of both users and transactions. In addition, the cryptocurrency platforms are now required to comply with KYC rules. Meanwhile, a senior representative of the ECB has called for the separation of tryptamines from the traditional Finance industry.
Strengthening EU Rules on the prevention of money laundering and financing of terrorism» was declared the main goal of the changes adopted in the framework of the «action plan», launched after the terrorist attacks on Europe in 2016. The new Directive provides for «the cessation of funding criminals, without impeding the normal functioning of payment systems», — said the press service of the Council.
Amendments to the EU Directive 2015/849 of the European Parliament and of the Council of 20 may 2015 were adopted without discussion at a meeting of the General Affairs Council on Monday. The move follows the agreement with the European Parliament in December 2017. In April this year, MEPs voted in support of action for «greater regulation of cryptocurrencies».
The main changes are associated with the address «the risks posed by virtual currency», through the adoption of measures to reduce anonymity for capturadora, and for the transaction of cryptocurrencies. According to the text of the amendments, operators of exchanges that exchange virtual and Fiat currencies, as well as the wallet providers will be required to identify suspicious activity.
The Directive States that authorities must have the ability to control the use of cryptocurrencies through these platforms, and the national financial intelligence unit shall have access to information that allows them to associate cryptates with the personality of their owners.
The authors recognize that these measures do not end up solving the problem of anonymity. These rules should be detailed by member States, which have 18 months to add to the provisions of this Directive in their national legislation. Once that happens, cryptocurrency exchanges across the EU will be bound by stricter rules to combat money-laundering (AML) and combating the financing of terrorism (CTF), including by imposing a complete verification of customers on their platforms.
Some companies have already taken steps in this direction. Popular P2P exchange Localbitcoins recently updated its User agreement. Representatives of the platform acknowledged that changes were made mainly due to new EU regulations. The administration notes that sometimes there may be situations where the client will need to provide your ID. These situations include: exceeding specific limits on trade with the use of advertising, investigation of fraud, and also hacking and account recovery. The new User agreement will come into force within a month.
The definition of virtual currencies
The EU Council States that «virtual currency is not to be confused with electronic money». In his Directive stated that while cryptocurrencies can be used as a means of payment, they can also serve other purposes and find wider application. For example, be used as a medium of exchange, investment and storage of capital.
It presents a definition of «virtual currency» in which they referred to as «digital representation of value that is not available and not provided by the Central Bank or public authority». The Directive also says that cryptocurrencies are not tied to traditional currencies legitimate and have no legal status with Fiat currency, but is accepted by natural or juridical persons as a means of exchange. Cryptocurrencies can be transferred to, stored and sold electronically, the document says.
The Council also determined the wallet providers as «organizations that protect private cryptographic keys on behalf of their clients, with the aim of storage and transmission of virtual currencies». According to the document, the national authorities must ensure the registration or licensing of providers of wallets, along with operators of cripture.
The Directive also introduces changes in relation to the use of anonymous prepaid Bank cards, to «deprive the terrorists this means of financing.» The threshold for obligatory identification of their owners was reduced to 150 euros. Identity verification is also required in cases of transactions with remote payment exceeding 50 euros.
The separation of the cryptocurrency industry
As Brussels strengthens surveillance of cryptocurrency transactions, the representative of the ECB suggests to separate the cryptocurrency industry from the sphere of traditional Finance. According to Reuters, a senior representative of the European Central Bank said that banks must separate any activities related to virtual currencies, from other operations and even maintain their capital for risk reduction. The official also called for the regulation of issuers of crypto-currencies and token-based exchanges and any Bank or clearing organization associated with them.
«Because of the high volatility of virtual currencies may seem appropriate for any trade they maintained sufficient capital levels and was separated from other trading and investment operations,» said ECB Executive Board member Yves Mersch (Yves Mersch) at a conference in Turkey on Monday.
He added that the cryptocurrency market is still too small to threaten financial stability, but warned that the situation may change. Mersch stressed that «it is necessary to understand whether to be reconstructed into any activity with virtual currencies, ongoing financial market infrastructures».