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New Regulations Set To Throw European Crypto Space into Turmoil

New Regulations Set To Throw European Crypto Space into Turmoil

New Regulations Set To Throw European Crypto Space into Turmoil

Politicians and regulators are growing increasingly aware of the significance of blockchain assets,

and have begun scrambling to create rules intended to reign in the open market activity that is a hallmark of crypto use. In Europe, the Fifth Anti-Money Laundering Directive (AMLD5) has now taken effect, which directly addresses a range of cryptocurrency-related issues. This set of regulations has European crypto firms scrambling to sort out the compliance measures, and highlights the extreme difficulty lawmakers are having at trying to navigate and control the changes underway in the global economic space.

Passed under the guise of fighting criminal activity, AMLD5 creates the most comprehensive set of crypto regulations to-date in the Eurozone. At their core, they are designed to create transparency for all aspects of crypto use. For example, exchanges will be required to implement rigid know-your-customer (KYC) as will providers of custodial wallets. Suspected illegal activity is to be tracked, and various law enforcement agencies can investigate user activity at will. Not surprisingly, the reaction from the European crypto community has been harsh. Blockchain-related companies have balked at the expense of compliance. Deribit, a Dutch exchange, recently announced that it will relocate to Panama. U.K.-based Bottle Pay, a custodial wallet service, has shut down. More casualties of this regulatory implementation are certain to follow.

Aside from the costs involved, the rules being imposed are confusing, and fail to address the myriad of complex issues surrounding Blockchain platforms in a comprehensive manner. Notably, the supranational and quasi-anonymous architecture of the technology does not work well with laws designed to apply to defined geographic regions. If enforced as intended the AMLD5 could prevent many crypto-related companies from operating. Also, fines for non-compliance will be as high as 200,000 Euros per incident.

As concerning as the AMLD5 regulations are, they are only the first in a series of tough new crypto rules in the global pipeline. Simply put, the world’s major economies are now taking this new asset class seriously, and leaders do not like the economic paradigm shift now underway. Most of these rules have been created by lawmakers with little knowledge or experience with distributed ledgers, and are likely to be heavily influenced by the always powerful players from the legacy financial space. In other words, the market recovery underway is likely to be tempered by hostile action on the legal front. 

On the bright side, the changes underway are a natural and expected step in the move toward mainstream cryptocurrency adoption. Bad laws, although unfortunate, must be experienced for policymakers to learn and adapt. Nevertheless, for the time being, the European crypto community is bracing for what is certain to be a bumpy ride ahead.

Article Produced By
Trevor Smith

https://www.crypto-news.net/new-regulations-set-to-throw-european-crypto-space-into-turmoil/

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