The European Commission has released an Inception Impact Assessment [PDF] considering transaction limits on virtual currency transactions as it steps up efforts in its fight against the financing of terrorism.
On 2 February, 2016, the Commission published a Communication to the Council and the Parliament on an Action Plan to tackle terrorism financing. The Action Plan builds on existing EU rules to adapt to new threats and intends at updating EU policies that are in line with international standards.
In a bid to deal with the controls of cash entering or leaving a country, reference is made to explore the relevant upper limits to cash payments.
According to the Action Plan, it states that ‘payments in cash are widely used in the financing of terrorist activities…In this context, the relevance of potential upper limits to cash payments could also be explored.’
As of February 12, 2016, the Economic and Financial Affairs Council called on the Commission to explore the need for restrictions on cash payments exceeding certain thresholds. This can be seen in conjunction with the European Central Bank’s (ECB) decision as of 4 May, 2016 to discontinue the production of the 500 Euro banknote. The issuance of this value is expected to cease by around 2018 to tackle issues circulating that this note may be used to finance illegal activities.
Considering recent technological developments around virtual currencies such as bitcoin the EC is considering an option to extend restrictions to cash payments to all payments ensuring anonymity, which includes virtual currencies and payments in kind.
The amendments to the Anti-Money Laundering Directive (AML) shares the Action Plan’s objective. Therefore, any measure that limits cash payments would be complementary to the actions addressed by the review of the AML Directive targeting risks posed through virtual currencies and prepaid instruments.
Earlier this month the European Parliament released a new report focusing on virtual currencies like bitcoin for the first time in a bid to tackle anti-money laundering issues. It’s a priority that the EC hopes to achieve by the end of 2017.
As part of its mission to bring an end to the anonymity associated with digital currency transactions, the EC proposed stricter rules in July for the use of digital currencies targeting amendments to the 2015 Fourth Anti-Money Laundering Directive.
Additionally, in a way of controlling virtual currencies such as bitcoin the ECB proposed a directive of the European Parliament and of the Council in October, stating that ‘virtual currencies do not qualify as currencies from a Union perspective.’
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