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Cyber Bitcoin
Edited by qqqpeter at 2020-4-13 16:31 reported that the European Parliamentary Research Service, a think tank within the European Parliament's research arm, released a new study in April that suggests that while Europe's cryptocurrencies have been active in decree making, the anti-money laundering framework originally used is outdated, with proposals such as extending regulation and describing investment risks.


The EU Parliament has been quite active in defining the legality of cryptocurrencies. The council adopted the current Anti-Money Laundering Directive 5 (AMLD5) cryptocurrency governance framework back in 2018, which requires cryptocurrency exchanges and crypto asset custodians to register with regulators and demonstrate that their services comply with KYC / AML rules.

But recently, the EU Parliamentary Research Service released a new study in which its researchers argued that the AMLD5 framework is now outdated and should adopt more advanced standards compared to higher international standards, such as the Financial Action Task Force (FATF) against money laundering . The report claims,

In order to keep the European AML / CFT framework in step with the reality in the encryption industry, the EU could consider additional regulatory measures.

Expanding the scope of regulation

The first recommendation in the report relates to expanding the regulatory scope of the AML / CFT framework. First, the researchers observed a "significant increase" in the number of platform tokens and suggested that privately issued tokens be used as a subcategory of cryptocurrencies.

And mentioning that some corporate entities that are an extension of the crypto industry, including exchanges for coin trading, financial institutions involved in cryptocurrency fundraising activities and centralized trading platforms, are not covered under the current framework, the researchers recommend focusing on entities in this niche in order to practice better AML.

At the same time, the report suggests that the activities of cryptocurrency miners need to be closely monitored, as illegal actors can easily use the mining industry to carry out illegal activities, it said,

Nowadays tokens have appeared, which do not always require a large mine to mine, and can be done at home with some simple hardware device running, and as it stands, such mining can be done by anyone, and of course by criminals set up. By definition, newly mined coins are "clean," so if someone, such as a bank, is willing to convert them into legal tender or other crypto assets, the funds generated will also be clean.

Finally, it means that the first step in regulation may be to try to determine the use of the technology, and if it is proven to have blind spots, then appropriate countermeasures should follow.

Interestingly, the researchers assert that token developers and non-custodial wallet providers should not be bound by anti-money laundering procedures because they only provide technical infrastructure.

Description of investment risk

The report states that cryptocurrencies are more volatile in price and have not proven their ability to adjust flexibly to market fluctuations. For example, on the cryptocurrency bloodbath days of March 12-13, the price of Bitcoin fell by more than 50 percent due to the global pandemic of the new crown virus (COVID-19).

It is worth noting that despite the many similarities between cryptocurrencies and existing financial markets, digital assets are in fact incompatible with traditional financial laws. The researchers therefore recommend a more transparent approach for financial institutions operating cryptocurrency portfolios,

Encrypted assets do not qualify as MiFID II financial instruments or EMD2 e-money and therefore evade all EU financial regulations, and the EU should at least have appropriate risk disclosure requirements in place so that investors and consumers can be aware of the potential risks before investing in these encrypted assets.

It can be seen that cryptocurrencies do not easily adapt to the existing financial legal system and therefore pose greater risks to investors, and researchers have found that there are problems with allowing financial institutions to engage in crypto-asset transactions under current regulations,

Currently, EU financial law does not prohibit financial institutions from holding, gaining exposure to, or providing services related to crypto assets, and they are likely to face significant losses if they decide to book them on their balance sheets or engage in activities that involve them.


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