“End with the Wild West” — new regulations in cryptocurrency trading in the EU

The European Union follows the global trend of regulating the cryptocurrency industry. While some countries ban the use of digital assets, others are putting cryptocurrencies into circulation at the same time. Meanwhile, the EU has created regulations that introduce digital money control at a similar level as FIAT currencies. Entering into force, these regulations will be adopted in all European Union countries.

Ernest Urtasun, MEP and negotiator in the European Parliament said: “No more unregulated cryptocurrencies in the Wild West” when it was decided to tighten the rules on trading digital assets. First and foremost, the goal is to make it easier for criminals to use cryptocurrencies. The more so as the Russian Federation is currently circumventing economic sanctions precisely by using digital currencies. The first regulatory proposals were quite controversial and assumed that all registered wallets, even those of users, would be subject to anti-money laundering procedures. It is about the AML procedure, i.e. an obligation imposed on institutions and companies from the financial industry — identifying, monitoring and reporting suspected money laundering.

When the new rules are adopted, exchanges, bureaux de change and depositaries will have to provide information on the transactions to the relevant authorities. It is mainly about issues:

-providing full information and the sender of the message along with the funds (no matter what the transaction is worth).

-separate regulations for “unhosted” wallets (wallets maintained by single users)

Of course, all this data will be collected, stored and sent in accordance with the principles of the Personal Data Protection Directive (GDPR). Transactions between private owners of cryptocurrencies (P2P) remain outside the regulations. Such wallets will be in the circle of interest only when there is a transaction with a hosted wallet managed by the exchange. Interestingly, the regulations will also apply to ATM operators in which cryptocurrency transactions can be made.

The question arises whether the introduction of new rules is a big obstacle in the industry. It turns out not. It is true that all self-respecting institutions or companies that trade digital assets should have AML or KYC (Know Your Customer) procedures in place. Of course, this is a matter of additional documents, but it makes honest customers feel safe. And most importantly, the regulations will eventually become identical across all European Union countries in the next few to several months.

18 months after the regulations were introduced, their effects will be reviewed and then decisions will be made as to the introduction of additional regulations.