New regulations for Anti-Money Laundering (AML) will come into force in Europe on January 10. The rules, which for the first time, address cryptocurrency enterprises, are likely to have a massive impact on the industry.
In less than a month, the Fifth Anti-Money Laundering Directive (5AMLD) will take full effect. It was discussed last year in May. For the first time, the rules explain what the word “virtual currency” means: a digital value representation not provided or assured by a central bank or public authority.
The new regulations would allow those offering virtual currency custodial services to comply with the AML regulations set out in 4AMLD. This will mean that exchange sites providing services within the European Union will have to send customer information to relevant authorities and conduct due diligence tests on user activity reckoned suspiciously.
This is likely to affect the industry significantly. As writer Larry Cermak points out, two absolute giants of the exchange industry, including Binance and OKEx, would immediately have to abide by the new rules or stop posing services to Europe.
5AMLD’s main effect on the cryptocurrency industry mandates all EU member states to implement AML Regulations. Such exchanges will now have to follow the rules of KYC (Know Your Customer) to track customer purchases and to file suspicious commotion reports. Customers would undergo this process by submitting documents as proofs of their identities, ensuring that clients “are who they appear to be,” trustworthy, and would not try to misuse the network for malicious purposes.
Until now, EU crypto businesses have been able to convey their services devoid of any AML and KYC pedals in place. It produced a competitive problem. However, many have been complying with AML already.
Binance, one of the most successful exchanges due to its high withdrawal parameters without necessitating customer information tests, would need to update its own policies. It currently permits users to delete two BTCs without any KYC test. Clearly, this does not comply with the AML legislation and needs to be addressed. Alternatively, it might resolve to extract its services completely from the EU.
Despite some jurisdictions’ increased regulatory scrutiny, Binance has already shown its willingness to compromise in continuing to sell its services to key global markets. Earlier this year, the company abruptly pulled out from the US before initiating Binance US — a platform for American users that was much reduced but compliant with regulations.
Several businesses have already closed down, citing the regulatory measures that are coming in. For example, BottlePay reported last week that the new regulations would prohibit it from continuing to provide its social media tipping provision in a manner unswerving with its current operation. More than compromise, the company announced in a press release that it would cease to function at the end of the year. Many firms have also made similar announcements.
While the upcoming regulations would undoubtedly shake the way European cryptocurrency companies work, some tend to embrace the change. Many believe that the new rules would deliver greater certainty.
Regulators approved the revised legislation back in 2018, and all members had 18 months to adjust their company accordingly. On January 10, time runs out. And if the providers do not meet any of these standards, they are going to have to pay fines and penalties, or even face being shut down.