EU creates new regulator for cryptography oversight

The European Union (EU) plans to establish a sixth “Anti-Money Laundering Authority” that will be specifically responsible for regulating the cryptocurrency industry.

While the Markets in Crypto Assets Regulation and the controversial Fund Transfer Regulation have received the most attention from the cryptocurrency industry, they are only a small part of a larger package of EU anti-money laundering (AML) policies. that will have significant effects on all financial institutions.

EU to further regulate crypto

The European Council, European Commission and Parliament are creating a new regulatory body for cryptocurrencies that will have authority over the sector.

A new crypto regulatory organization is under consideration by the European Union.

The EU is creating a sixth “Anti-Money Laundering Authority”, or AMLD6, which, according to recent reports, will have direct control over the cryptocurrency sector.

In July last year, the European Commission published its proposal for the AMLD6, or Sixth AML/CFT Directive. Last month, the European Council made its version public. It will be discussed by the European Parliament after the current August break. The three bodies will begin so-called trilogues after each has passed its own version of the legislation.

The creation of an EU-wide anti-money laundering regulator is an important part of the new legislation. There seems to be little discussion about the need for such a body and the requirement to have direct control over EU-based crypto asset service providers, although the legislative bodies have yet to consult.

AMLD6 would apparently be tasked with overseeing crypto service providers, especially those deemed “high risk”, unlike previous anti-money laundering regulations that only provided frameworks for EU countries to collect and share information. Therefore, the regulator is expected to limit the potential for jurisdictional arbitration within the zone.

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BTC/USD trades at $24k. Source: TradingView

Below is a description of the new system from a parliamentary briefing:

“EU-level oversight consisting of a hub-and-spoke model – ie EU-level supervisor in charge of direct supervision of certain financial institutions (FIs), indirect supervision/coordination of the other FIs, and a coordinating role for the supervision of the non-financial sector as a first step.”

The crypto asset markets and fund transfer laws, which apply not only to the crypto business but to all financial institutions in the bloc, will not have the same focus as AMLD6, which will have a different emphasis.

Union has adopted a strict approach to crypto

The EU has adopted a strict approach to crypto laws. Recently, the European Parliament voted in favor of anti-anonymity rules that would increase the cost, difficulty or even impossibility of transactions between unhosted wallets and exchanges. And even if a bill to ban Proof-of-Work mining is rejected by the legislative body, the European Central Bank still expects such a ban to eventually happen due to environmental concerns.

For the EU, the global organization will represent an important change. AML guidelines of 2015 and 2018, specifically four and five, set requirements for member states to collect and make available specific data, including details about the beneficial owners of companies.

The duration of implementation will depend on the negotiations between the European Parliament and subsequent trilogues with the committee. It will take years for the regulation to be fully implemented, including AMLA’s staffing. However, it seems that there is little doubt about the arrival of such a regulator.

Featured image from Shutterstock, chart from TradingView.com

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