The European Commission published a new directive draft last week proposing to extend strict anti-money laundering (AML) regulation to both virtual currency exchange services and custodial wallet providers. Intended to counter “money launderers, tax evaders, terrorists, fraudsters and other criminals,” the directive could mean that many Bitcoin companies in the E.U. will have to apply know your customer (KYC) types of checks on their users.
The proposal, which particularly focuses on terrorist financing, intends to restrict the anonymous use of virtual currencies, presumably referring to bitcoin and altcoins.
According to the draft published by the executive arm of the European Union: “Transactions with virtual currencies benefit from a higher degree of anonymity than classical financial fund transfers and therefore entail a risk that virtual currency may be used by terrorist organizations to conceal financial transfers. Possible further risks relate to the irreversibility of transactions, means of dealing with fraudulent operations, the opaque and technologically complex nature of the industry, and the lack of regulatory safeguards.” As such, the European Commission recommends that existing anti-money laundering regulation should apply to virtual currency services, and, in particular, to exchanges and custodial wallet providers.
The European Commission writes: “[T]o 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.” If adopted, Bitcoin companies will be required to collect their customers’ identity documents; something several of them already do, though it is currently not mandatory. (In some cases financial partners ‒ such as banks ‒ do require Bitcoin companies to apply KYC in order to get an account.) Additionally, Bitcoin […]
