Cryptocurrency and Money Laundering | European Union

Cryptocurrency and Money Laundering.

DIRECTIVE (EU) 2015/849 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 20 May 2015 is one of the central regulatory pillars of the European Union for the prevention of the use of the financial system for money laundering or terrorist financing.

Recently, on April 19, 2018, a legislative resolution of the European Parliament was approved, modifying the aforementioned Directive 2015/849.

The main change has been to extend the application of the anti-money laundering and terrorist financing Directive to:

1st.- providers of services exchanging virtual currencies for fiat currencies (commonly known as exchanges);

2nd.- Providers of custodial wallet services

To this end, and for clarification, it has incorporated two definitions into its text:

“Virtual Currencies”:

A digital representation of value not issued or guaranteed by a central bank or public authority, not necessarily associated with a legally established currency, which does not possess the legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored, and traded electronically;

“Custodial Wallet Service Provider”:

An entity that provides services to safeguard private cryptographic keys on behalf of its clients, for the holding, storage, and transfer of virtual currencies.

Among the reasons that have motivated this decision, the following have been put forward:

1st.- Providers of services exchanging virtual currencies for fiat currencies (i.e., banknotes and coins designated as legal tender and electronic money of a country accepted as a medium of exchange in the issuing country), as well as providers of custodial wallet services, are not obliged by the Union to detect suspicious activities.

This would allow for the possibility of transferring money into the Union’s financial system or within virtual currency networks, concealing transfers or enjoying a certain degree of anonymity on these platforms.

2nd.- The anonymity of virtual currencies allows for their potential misuse for criminal purposes. However, it is recognized that the inclusion of providers of services exchanging virtual currencies for fiat currencies and providers of custodial wallet services will not fully resolve the issue of anonymity associated with virtual currency transactions, as anonymity largely remains within the virtual currency environment.

The Directive will enter into force 20 days after its publication and will grant a transposition period of 18 months to the Member States. For more information on the objectives of the DIRECTIVE, you can find more details on the European Parliament’s website.

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