European Parliament Report Outlines Europe’s Tightening Crypto Regulations

According to a report released last Thursday, the European Parliament is taking further steps to place tighter regulations on cryptocurrency.

The report outlined the latest amendments to “Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing”.  The original proposal to amend the Directive was originally published last July.

The amendments aim to serve several purposes–however, with the recent rise of terrorism in many major European cities, the most pressing purpose may be to require crypto-related businesses (ie wallets and exchanges) to report suspicious activity to the proper authorities.  The Parliament added that no such requirement has existed up to this point.

The amendments also provide a more concrete legal definition of what cryptocurrencies are.  A clause was added to the Directive stating that cryptocurrencies do “not possess a legal status of currency or money”. Additionally, the Directive now explicitly states that “virtual currencies cannot be anonymous”.

A definition of a “custodial wallet” was also added to the Directive as a result of the amendments. A custodial wallet “means an entity that provides services to safeguard private cryptographic keys on behalf of their customers, to holding, store and transfer virtual currencies”.  In other words, custodial wallets are wallets that  Some popular examples of custodial wallets are Coinbase and Exodus.

A Lot of European Optimism When it Comes to Crypto

This latest statement comes at an integral moment in the history of Europe’s relationship with cryptocurrency.  Some European countries are very eager to take hold of the economic and technological opportunities that cryptocurrency has to offer.  

For example, Kaspar Korjus, the managing director of Estonia’s e-Residency program, publicly floated the idea of a national Estonian cryptocurrency earlier this year, though the idea was later shot down by the ECB President.

Additionally, Finnish economists Gur Huberman, Jacob Leshno, and Clamac Moallemi released a report in early September stating that Bitcoin cannot and should not be regulated.  The report also highlighted the potential that cryptocurrency has to make the EU’s existing financial systems more secure and efficient.

Europe’s Attitude Toward Crypto Regulation Targets Criminals Without Blocking Innovation

With as much positivity and forward-thinking that there is surrounding blockchain technology and cryptocurrency in Europe generally, there is an inside push to begin regulating cryptocurrencies, perhaps even more so than in the United States.  

Along with the recent statement made by the EU President, Europe is the midst of a few major efforts targeting the use of legitimate cryptocurrencies as funding for terrorism and sex trafficking.  Project TITANIUM (Tools for the Investigation of Transactions in Underground Markets) is one such effort.  

TITANIUM has teamed up private research firms, universities, and law enforcement agencies from Finland, the U.K., Germany, the Netherlands, Spain, and Austria.  Along with preventing the use of cryptocurrencies for nefarious purposes, TITANIUM aims to de-anonymize cryptocurrency addresses in general.

Additionally, several European governments have taken steps to crack down on MLM-scheme “scam coins”.  In late August, the Finnish government launched an investigation against Onecoin, a now-known crypto scam.  Shortly thereafter, The Italian AntiTrust Authority (IAA), an Italian consumer watchdog group, issued a multi-million-dollar fine against Onecoin.

More recently, the Swiss Financial Market Supervisory Authority (FINMA) recently began a legal battle against Ecoin, another known scam coin.

Worldwide Regulations On the Rise

The report on this particular directive comes in the midst of a rather turbulent time in cryptocurrency’s global history.  Since early September, the Chinese government has been increasing sanctions against cryptocurrency–first banning ICOs, then local exchanges; the Chinese government has now cast its eyes to Over-the-Counter trading and perhaps even crypto mining.

While the short-term effect of these political changes has been largely negative on the value of Bitcoin and other cryptocurrencies, many analysts argue that regulations are generally a good thing for cryptocurrency in the long run.  

This is because tighter regulations often attract investors who were wary of buying into something so unregulated.  Therefore, more regulations will theoretically lead to larger market caps and coin valuations.  Something similar occurred last Spring, when Japan legitimized Ethereum and Bitcoin as forms of payment–there was an explosion in the crypto markets unlike anything that has ever been seen before.  

As Europe takes further steps to regulate cryptocurrency, we can undoubtedly expect to see more fluctuations in the crypto markets at large.  If you’re unsure to do with your coins, keep your eyes on the horizon; taking the long view could one day bring you large returns.