What has happened?
The European Parliament has approved measures in favour of closer regulation of virtual currencies.
What does this mean?
The members of the European Parliament (MEPs) voted by a vast majority last week to approve a December 2017 agreement with the European Council, which among other things calls for "closer regulation of virtual currencies, like Bitcoin, to prevent them being used for money laundering and terrorism financing".
The MEPs passed the decision with 574 in favour, 13 against and 60 abstentions.
The agreement represents the latest update to the EU’s Anti-Money Laundering Directive and is partly a response to the terrorist attacks of 2015 and 2016 in Paris and Brussels, as well as the Panama Papers leaks.
In a press release, the EU Parliament explained that the new legislation aims to address risks linked to virtual currencies and prepaid cards.
The measures would end the anonymity associated with virtual currencies and virtual currency exchanges.
Like banks, custodian wallet providers will have to apply customer due diligence controls, including customer verification requirements, which are also known as "Know Your Customer" or "KYC".
In addition cryptocurrency trading platforms and wallet providers will also have to be registered, as will currency exchanges and cheque cashing offices, and trust or company services providers.
Co-rapporteur Krišjanis KARINŠ, a Latvian MEP, said:
“Criminal behaviour hasn’t changed. Criminals use anonymity to launder their illicit proceeds or finance terrorism. This legislation helps address the threats to our citizens and the financial sector by allowing greater access to the information about the people behind firms and by tightening rules regulating virtual currencies and anonymous prepaid cards.”
Another Co-rapporteur and Dutch MEP, Judith Sargentini said that “billions of euros [are lost] to money laundering, terrorism financing, tax evasion and avoidance" every year.
"With this new legislation, we introduce tougher measures, widening the duty of financial entities to undertake customer due diligence. This will shine a light on those who hide behind companies and trusts and keep our financial systems clean. These rules will also be of enormous benefit to developing countries and their fight against illicit outflows of money which is desperately needed for investment in their own societies,” she added.
The Parliament also supported measures to provide public access to information on the real owners of firms operating in the EU and reduced the threshold for identifying the holders of prepaid cards from €250 to €150.
Other measures included a new protection for whistleblowers who report money laundering (including the right to anonymity) and "tougher criteria for assessing whether non-EU countries pose an increased risk of money laundering and closer scrutiny of transactions involving nationals from risky countries (including the possibility of sanctions)".
What happens now?
The updated directive will enter into force three days after its publication in the Official Journal of the European Union.
Member states will then have 18 months to transpose the new rules into national law.
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