Increased Regulation of Cryptocurrencies in Europe: Anticipated Alterations
By the year 2027, the European Union (EU) will usher in a new era of cryptocurrency regulations with the implementation of the Anti-Money Laundering Regulation (AMLR). This move marks a significant shift, as anonymous cryptocurrency wallets and privacy-focused coins will be prohibited.
Crypto platforms in Europe are set to come under direct supervision with the new regulations. Platforms that serve over 20,000 customers across at least 6 EU countries, handle transactions worth more than €50 million, or operate in a total of 6 EU countries will be subject to scrutiny by the European Anti-Money Laundering Authority (AMLA).
Goodbye, Anonymity
The era of untraceable digital wallets will draw to a close by 2029, as a centralized and automatic registration system is set to trace crypto accounts across the EU. By this time, crypto platforms will be required to shut down anonymous accounts, block privacy coins, and verify identities for transactions exceeding €1,000. Transactions considered riskier will face stricter scrutiny.
This regulatory change aligns with the traditional banking practice known as "know your customer." As a result, the crypto world will face the same level of scrutiny as the traditional banking sector.
Navigating the AML Handbook
The European Crypto Initiative (EUCI) has published the "AML Handbook for Crypto Activities" to serve as a guide for companies. The handbook outlines 13 essential steps, including regular updates of identity information, real-time tracking of wallets, cross-border risk analysis, and data sharing compatible with the future data recording system.
The European Banking Authority (EBA) will continue to clarify the technical aspects of the implementation over the next two years.
Platforms that adapt early to privacy-preserving technologies like zero-knowledge proof are expected to gain an advantage. On the other hand, platforms dealing in privacy coins may need to adapt their strategies or exit the EU market.
Breaking Banks' Monopoly
Firms not complying with the rules by the middle of 2027 may face penalties, loss of reputation, and exclusion from the European market.
According to a report published in March, Europe is the most open banking region for cryptocurrency worldwide. This success is attributed to a regulatory process that started over 20 years ago, expanding the payment infrastructure with PSD and PSD2 regulations. The Markets in Crypto-Assets (MiCA) regulation has now created a clear framework for crypto assets, and the AMLR complements it by focusing on anti-money laundering (AML) risks.
Notable institutions like Standard Chartered in the UK, BBVA in Switzerland, and Deutsche Börse are already offering digital asset services, while US institutions lag behind in this area. The European Central Bank's new payment system and real-time payment regulations enable non-bank payment companies and future stablecoin exporters to process SEPA transfers via the central bank, fostering competition and pushing banks to innovate.
- With the new regulations, crypto platforms in Europe will be subject to direct supervision by the European Anti-Money Laundering Authority (AMLA) starting from 2027.
- By 2029, untraceable digital wallets will no longer exist in the EU as platforms will be required to shut down anonymous accounts, block privacy coins, and verify identities for transactions exceeding €1,000.
- The European Crypto Initiative (EUCI) has published the "AML Handbook for Crypto Activities" to help companies comply with the new regulations, which include regular updates of identity information, real-time tracking of wallets, cross-border risk analysis, and data sharing compatible with the future data recording system.
- The implementation of the Anti-Money Laundering Regulation (AMLR) aligns with the traditional banking practice of "know your customer," leading to increased scrutiny and regulation of the crypto industry in the EU. This movement could give an advantage to platforms that adapt early to privacy-preserving technologies like zero-knowledge proof, while those dealing in privacy coins may need to adapt their strategies or exit the EU market.
