- The EU Commission has unveiled a proposal to beat financial crime by putting regulatory pressure on cryptocurrency platforms.
- The new amendment has raised privacy concerns as it allows crypto users to be tracked and transactions to be traced.
- Stricter rules will address financial fraud and help the development of the EU crypto industry.
The crypto market has recently been scarred by numerous large-scale hacks and scams.
One might ask: how many serious financial security breaches will it take for the decision makers to actually start making decisions?
Due to its relatively young age, the crypto space has not yet put formal legal structure in place anywhere in the world, and certain features of blockchain technology make it that much more difficult to track.
On 20th July 2021, the EU Commission unveiled a proposal to beat financial crime by increasing surveillance on cryptocurrency exchanges and forbidding anonymous crypto wallets. Money laundering is a devastating threat to the entire market, but is tracing crypto-assets the only way to monitor illegal activity?
As the U.S. plans to follow the same path, this new regulation could mean the end of anonymity in crypto.
With the new proposal, the EU Commission seeks to gain more control and legal certainty over cryptocurrency. The regulation is supposed to instil confidence in consumer and investor protection and ensure the financial stability that is crucial for the successful development of financial technology.
“Cryptocurrency is one of the newest ways to launder money. Our rules will now apply to the whole of the crypto sector. We will ban anonymous crypto wallets and make sure that crypto-asset transfers are traceable,”
Mairead McGuinness, the European Commissioner for Financial Stability, claimed on Twitter.
With every transaction, there would have to be a recorded name, address, birth date, and account number of the account holder, plus the recipient’s information.
The new law raises serious privacy issues, as it enforces collection and distribution of cryptocurrency user data. Investors that use cryptocurrency due to its anonymity may now wish to stop trading.
In an exclusive email interview with DailyCoin, David Yermack, the Albert Fingerhut Professor of Finance and Business Transformation at New York University Stern School of Business, elaborated on the topic.
“There are very similar regulations under discussion in the U.S. These regulations might discourage certain crypto owners from trading, but similar rules already apply to regular financial markets. Maintaining user privacy is completely at odds with regulating money laundering, tax evasion, and other financial crimes.”
The EU, together with the U.S., is making changes to the crypto markets to end money laundering and limit other shady activities. Even though the new regulation inhibits user privacy, transparency is a significant factor in preventing financial crime.
It is possible that anonymous crypto-asset wallets and private transactions will be banned in the EU by 2024.
On The Flipside
- The regulation to tackle money laundering already applies to regular bank transfers.
- The proposal is subject to change and will take some years to be implemented in full.
Why You Should Care?
- The EU plans to enforce stricter rules on crypto-asset transfers by requiring full traceability of transactions, and banning anonymous crypto wallets.
- The aim of the regulation is to counter financial terrorism and prevent fraud.
- The new law diminishes user privacy and might discourage crypto investors from trading.