In a proposal today, the European Commission – the executive arm of the European Union – sought stricter rules on the use of virtual currencies like bitcoin.
Citing reasons of terrorism and money laundering, the European Commission has proposed stricter rules for the use of virtual currencies, an official press release revealed today.
The changes will see digital currency exchanges and wallet providers fall under the purview of the Anti-Money Laundering Directive (AMLD). Such a move will seek to bring an end to the anonymity associated with digital currency transactions.
The proposed rules will also tighten regulatory oversight on prepaid cards. The Commission is proposing to “minimize the use of anonymous payments through prepaid cards.” It aims to do so, by lowering the threshold for identification during prepaid card purchases from €250 to €150. Furthermore, it will also seek to widen the scope of verification requirements, potentially adding to KYC (Know Your Customer) procedures.
“Today’s proposals with help national authorities to track down people who hide their finances in order to commit crimes such as terrorism,” first vice-president of the European Commission, Frans Timmermans stated. “Member states will be able to get and share vital information about who really owns companies or trusts, who is dealing in online currencies, and who is using prepaid cards.”
The Commission is underlining its intent to curb terrorism financing in its proposal. In no uncertain terms, it states:
Tackling terrorist financing risks linked to virtual currencies: to prevent misuse of virtual currencies for money laundering and terrorist financing purposes, the Commission proposes to bring virtual currency exchange platforms and custodian wallet providers under the scope of the Anti-Money Laundering Directive.
These entities will have to apply customer due diligence controls when exchanging virtual for real currencies, ending the anonymity associated with such exchanges;
The latest proposal is the continuation of a plan set in motion in early February 2016, when the European Commission proposed an action plan [PDF] that prioritized ending the anonymity of digital currency transactions.
The current AMLD, as of May 2015, does not include any references or mention of digital currencies, like bitcoin.
The proposals put forth today by the European Commission will need approval from EU member states and the European Union Parliament before they become law.
The EU Parliament has already approved a proposal from late February to install a bitcoin- and blockchain-centric taskforce overseen by the European Commission. Approved in May 2016, the task force will seek to study and understand the risks and opportunities of virtual currencies and blockchain or distributed ledger technology.
The push to regulate and introduce strict rules for virtual currency transactions comes despite a report by the European Union’s law enforcement agency, Europol, explicitly noting that there was no evidence of bitcoin used for terrorism financing. The report [PDF], which was deliberated and revealed after the Paris terrorist attacks in November 2015 stated:
Despite third party reporting suggesting the use of anonymous currencies like Bitcoin by terrorists to finance their activities, this has not been confirmed by law enforcement.
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Last modified: June 10, 2020 1:36 PM UTC