The European Commission has presented a proposal to tighten existing regulations on cryptocurrencies to improve its fight against financial crimes.
Following a review of its current regulations against financial crimes and other illicit activities, the European Commission presented an ambitious proposal which seeks to tighten its existing regulations and combat risk. The European Commission stressed that the cryptocurrencies, and digital assets can facilitate illicit activities, as it is a unique, decentralized and global financial system.
According to the proposal, the objective is to improve the existing regulatory framework and strengthen the regulations that apply to the cryptocurrency industry, in order to exercise greater control over the financial movements and commercial activities that occur within this digital ecosystem.
The European Commission's proposal is part of its security strategy for 2020-2025, with which it seeks to improve the security of its financial system and minimize the risks of money laundering and terrorist financing. In its proposal, the European Commission also seeks the creation of a new regulatory entity to oversee value transfers involving cryptoassets.
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Identification of transactions from 1.000 euros
The European Commission wants companies, businesses and other providers of crypto-asset services to be required by law to provide data and information on the financial and commercial transactions carried out by their clients and users with cryptocurrencies and digital assets through their platforms. In this way, the organization seeks not only to track the transactions carried out, but also to make them identifiable with user data. If the proposal is approved, the Commission will be able to have full control over the transactions carried out from exchanges and platforms operating within their jurisdiction and apply the full weight of the law to those who commit financial crimes.
Strict KYC control
This proposal would apply to transactions with a value equal to or greater than 1.000 euros, to avoid risks with small transfers of funds, and would require personal data through strict KYC (Know Your Customer) control, where users must provide information such as: first and last names, amount and date of transactions, physical address of those involved in the transactions (sender and receiver), dates of birth and associated bank account numbers.
The European Commission's justification for calling for stricter regulation of the crypto industry is that, in its view, cross-border and decentralized payments enabled by cryptocurrencies pose a major risk to the security and stability of the existing financial system. Having control over the personal data and banking information of cryptocurrency users will help authorities speed up investigations and recover funds from anywhere, the Commission said.
Cryptocurrency monitoring
Specifically, the proposal presented by the Commission states that the nature of digital currencies is the one that best integrates with the global nature of terrorist organisations. Therefore, the organisation must improve its surveillance of such transactions in order to combat money laundering, terrorist financing and other suspicious financial activities used by organised crime. The Commission also points out that the implementation of stricter regulations will align Europe with the actions of the Financial Action Task Force (FATF) on the digital industry.
Recently, the FATF, the organization that fights money laundering worldwide, included Malta in its grey list of jurisdictions that do not comply with their regulations for the control of financial crimes. The agency noted that the island, considered the paradise of Blockchain and Crypto, has many strategic deficiencies to combat financial risks. Other nations such as the Philippines, Panama, Jamaica and Pakistan accompany Malta on this list as jurisdictions with strategic deficiencies.
Anonymous wallets banned
In addition to the supervisory body that the European Commission wants to create, it proposes the creation of a Sixth Directive to replace Directive 2015/849/EU, known as the 4AMLD Directive, which combats money laundering.
The Commission also wants to ban the use of anonymous cryptocurrency wallets, such as Wasabi Wallet and Samourai Wallet, which allow users to transact with cryptocurrencies while preserving their privacy. Presumably, mixer protocols and services that seek to offer anonymity, such as the coinjo, will also be banned if the Commission's proposal is approved and enters into force.
The United States and stablecoins
US regulators are also debating what regulations should apply to the digital industry. On Monday, US Treasury Secretary Janet Yellen called financial regulators to a meeting to address the need to regulate stablecoins.
The United States is considering regulating the stablecoins as an alternative to adopt the financial innovation of blockchain and cryptocurrencies and it is being considered whether the issuance of a CBDC for the dollar is necessary. According to the reading At the meeting, the growth of stablecoins, financial risks and their impact on the current system were the main topics addressed by regulators.
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