Strengthening Regulation of Encrypted Transactions: Understanding the Three Draft Bills Approved by the European Parliament

On April 1st, members of the European Parliament approved three draft bills to strengthen the regulation of encrypted transactions. The legislation covers money laundering and terrorist financing, and although it does not directly target digital assets, once signed into law, anonymous transfers will be limited to 1000 euros (approximately $1087). In addition, new regulations may be added to the Cryptographic Asset Market Rules (MiCA) Act. （Coinpaper）

The EU may ban anonymous cryptocurrency transfers exceeding 1000 euros

The European Parliament recently approved three draft bills that aim to enhance the regulation of encrypted transactions, with a focus on preventing money laundering and terrorist financing. While the bills do not directly target digital assets, their impact on the Cryptographic Asset Market Rules (MiCA) Act is expected to be significant. Once these bills are signed into law, anonymous transfers will be limited to 1000 euros ($1087).

Understanding the Three Draft Bills

The first draft bill aims to improve the transparency of anonymous payment transactions by introducing a €1000 limit for all anonymous transactions. The second draft bill targets the establishment of beneficial ownership registers for companies and trusts, while the third draft bill aims to create an EU-level anti-money laundering (AML) authority to ensure the effective implementation of AML rules.

Implications of the First Draft Bill

The first draft bill has sparked debate among cryptocurrency advocates and critics. Those in favor argue that it will help to prevent the use of digital assets for illicit activities such as money laundering and terrorist financing. Critics, on the other hand, argue that it will stifle innovation and harm privacy.
The bill, which limits anonymous transfers to €1000, will require users to identify themselves when making transfers above this threshold. This could potentially lead to a decrease in the use of digital assets for small transactions, as users may opt for traditional payment methods to avoid identification.

Establishing Beneficial Ownership Registers

The second draft bill aims to create beneficial ownership registers for companies and trusts. This would require them to disclose the identities of their beneficial owners, i.e., individuals who ultimately own, control, or benefit from the assets held in the company or trust.
The creation of these registers is expected to make it harder for criminals to use shell companies and trusts to hide their assets, as the registers will create a level of transparency that makes it easier for law enforcement agencies and financial regulators to identify beneficial owners and track their transactions.

EU-level Anti-Money Laundering Authority

The third draft bill proposes the creation of an EU-level anti-money laundering (AML) authority to ensure the effective implementation of AML rules. This would strengthen the EU’s AML framework by providing a centralized body that would be responsible for supervising the implementation of AML rules at a national level.
The proposed AML authority is expected to have a positive impact on the fight against money laundering and terrorist financing, as it would create a more robust regulatory environment across EU member states. This would make it harder for criminals to exploit regulatory loopholes and engage in illicit activities.

Implications for the Cryptocurrency Industry

The impact of these draft bills on the cryptocurrency industry is expected to be significant. The first draft bill, which limits anonymous transfers to €1000, could lead to a decrease in the use of digital assets for small transactions. The second draft bill, which establishes beneficial ownership registers, is expected to increase the level of transparency in the industry and make it harder for criminals to hide their assets.
The creation of an EU-level AML authority under the third draft bill is expected to strengthen the regulatory environment across the EU and make it harder for criminals to exploit regulatory loopholes. These measures are expected to promote the legitimacy and transparency of the cryptocurrency industry, which could ultimately lead to increased adoption and investment.

Conclusion

The three draft bills approved by the European Parliament are a significant step towards strengthening the regulation of encrypted transactions, with a particular focus on preventing money laundering and terrorist financing. While there are concerns about the potential impact of the bills on the cryptocurrency industry, they are expected to promote transparency and legitimacy in the industry, which could lead to increased adoption and investment.

FAQs

1. How will the first draft bill affect small transactions?
– The first draft bill limits anonymous transfers to €1000, which could lead to a decrease in the use of digital assets for small transactions.
2. Will the second draft bill make it harder for criminals to hide their assets?
– Yes, the second draft bill establishes beneficial ownership registers, which are expected to increase the level of transparency in the industry and make it harder for criminals to hide their assets.
3. How will the third draft bill strengthen the regulatory environment?
– The third draft bill proposes the creation of an EU-level anti-money laundering (AML) authority, which will be responsible for supervising the implementation of AML rules at a national level. This is expected to create a more robust regulatory environment and make it harder for criminals to exploit regulatory loopholes.