New EU money laundering rules could be unworkable and destructive to the crypto industry, some think. Others say crypto companies must learn to live with privacy-busting regulation.
The crypto sector is still reeling from a string of votes in the European Parliament that some warned could prove regulatory overkill, attendees at the Paris Blockchain Week Summit discovered on Wednesday.
Recent European Union plans to curb the energy footprint of proof-of-work technology — which some feared could amount to a bitcoin (BTC) ban — failed to get through the European Parliament when voted on in March. But a second, also controversial, anti-money laundering measure did pass and could now become law if governments also sign up to it.
People are now split into two groups. The first one claims that the regulation is inevitable and now they feel safer, knowing that the EU authorities are regulating and enforcing new rules onto the industry. The second group thinks that such measures will slow down the fast-growing industry and force people to use less safe hosted wallets. This may lead to people leaving the industry and ceasing to use crypto currencies as they do not feel safe not having access to the private key and un-hosted wallets.
Joshua Ellul, director of the Centre for Distributed Ledger Technology (DLT) at the University of Malta, told CoinDesk that recent decisions about crypto payments were “misinformed.”
Crypto “is definitely used for this (money laundering) activity just like cash is,” Ellul said in an interview shortly after the European Parliament vote but warned that lawmakers were “rushing to a solution.”
“Stifle it too early, and operators in a space will just move to another area,” he said.
He’s not the first to warn that an industry which is faced with heavy-handed laws could simply skip the bloc. But others are more upbeat, warning that regulation is inevitable — and that responding constructively to it would at least silence incumbent banks and others who are sceptical about crypto newcomers.
The EU’s move “might hurt short-term industry, because if someone doesn’t want to give his wallet information and he moves elsewhere, then, yeah, you might suffer,” Michael Amar, co-host of the summit, said.
In a letter sent to 27 EU finance ministers on April 13, crypto businesses asked policymakers to ensure their regulations did not go beyond rules already in place under the global Financial Action Task Force (FATF), which set standards for combating money laundering. Reuters reports.
In response to last month’s vote, 46 European crypto industry leaders and organisations said in their letter that the proposals “will put every digital asset owner at risk” by leading to public disclosure of transaction details and wallet addresses. This would reduce crypto holders’ privacy and safety, the organisers said.
CoinShares CEO Jean-Marie Mognetti, who drafted the letter, said that Europe currently had more complex crypto regulations than other regions, which deterred businesses from growing in Europe.
Diana Biggs, chief security officer at DeFi Technologies, who also organised the letter, said she was keen to increase the influence of the European crypto industry on policymaking in Brussels.
“There hasn’t been a strong enough or coordinated effort across our industry in Europe,” she said.