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The EU tightens the rules on anonymity in cryptocurrencies

The EU tightens the rules on anonymity in cryptocurrencies with a new directive to counter terrorism and crime

The EU tightens the rules on anonymity in cryptocurrencies. The General Affairs Council of the European Union has adopted a new directive to increase transparency in transactions related to the digital currencies. The goal is to counter the terrorism and criminal financing. Especially the money laundering in the framework of the Action Plan, developed in 2016 to combat a wave of terrorist attacks in Europe. It, however, without harming the broader functionality of existing and emerging payment systems, the trasactions and the entire functioning of the virtual currencies system.

The European directive principles

“The anonymity of virtual currencies allows their potential misuse for criminal purposes,” the new EU directive on cryptocurrencies report. “The inclusion of providers engaged in exchange services between virtual currencies and fiat currencies and custodian wallet providers will not entirely address the issue of anonymity attached to virtual currency transactions, as a large part of the virtual currency environment will remain anonymous because users can also transact without such providers. To combat the risks related to the anonymity – the European document go on -, national Financial Intelligence Units (FIUs) should be able to obtain information allowing them to associate virtual currency addresses to the identity of the owner of virtual currency. In addition, the possibility to allow users to self-declare to designated authorities on a voluntary basis should be further assessed.”

The EU goal is to counter terrorism and criminal financing, especially money laundering, without compromising fundamental rights and economic freedoms

In this context, the new EU directive on cryptocurrencies makes some changes to the preexisting directive 2015/849. They include increasing the scope of access to information on beneficial ownership, a measure meant to improve transparency regarding the ownership of trusts and companies; diminishing risk associated with prepaid cards and virtual currencies; increasing the scope and quality of cooperation between the various financial intelligence units (IFU) in Europe, and improving checks for transactions involving “high-risk third countries.” “These new rules respond to the need for increased security in Europe by further removing the means available to terrorists”, said Vladislav Goranov, minister for finance of Bulgaria, which currently holds the Council presidency. “They will enable us to disrupt criminal networks without compromising fundamental rights and economic freedoms.”

The European directive against the anonymity on the virtual currencies (file PDF)

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