The European AML regulations will change completely in the region compared to the last decade and these changes will reach all of those who store the clients’ crypto funds in order to provide fiat-to-crypto exchange services as we are reading further in the latest cryptocurrency news.
Not so long ago, European AML regulations were extended to cover the wallet services and providers for crypto-to-fiat exchanges in the EU. The crypto legislation is known as the EU Fifth Anti-Money Laundering Directive that entered the system on July 9, 2018, and will be transposed into the national legislation of each state of the union by 2020. Before this, most cryptocurrencies are falling out of the EU regulatory regime.
Similarly to the EU, the United States was also compelled to act on the crypto asset class and in 2013 the Financial Crimes Enforcement Network or FinCEN and introduced the interpretive guidance for cryptocurrency industry participants mainly the administrators and the exchangers. The exchangers are entities who engage as a business in the exchanging of digital currencies for real currencies. The administrators are entities that engage as businesses in issuing digital currency.
The EU members transpose the new directive into the national legislation and will already be more than a decade since the crypto regulation came into force in the US. By looking at both the US and EU cases, we can see a huge similarity of regulatory approaches. Both of the jurisdictions outline the importance of crypto regulations to fight terrorism and money laundering. The G-20 had e meeting in Japan back in June where it was noted that:
“While crypto-assets do not pose a threat to global financial stability at this point, we remain vigilant to risks, including those related to consumer and investor protection, anti-money laundering (AML) and countering the financing of terrorism (CFT).”
The specific crypto service providers have the same requirements as traditional financial institutions in terms of authorization from a financial regulator and customer identification including account monitoring, record keeping, and suspicious activity reporting. The EU member states want to impose stricter AML measures in their national legislations where the US is permitted to impose more stringent regulations in order not to get in conflict with the US federal law.
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