EU’s Crypto Crackdown Seeks To Ban Anonymous Transactions To Protect AML Laws

Cryptocurrencies have come a long way since the inception of Bitcoin. Thousands of different digital assets are available on a wide range of trading platforms, pushing the industry to be valued at billions of dollars. However, the growth of the crypto sector has also brought with it a range of new challenges, including concerns about money laundering and other illicit activities.

To address these concerns, a growing number of countries around the world are seeking to ban large crypto transactions in a bid to prevent illegal activities and protect anti-money laundering laws. In recent news, the European Union is set to vote on a proposed ban on large anonymous transactions involving cash or crypto, with a limited ban on self-hosted crypto payments also on the table.

EU Paves Its Way To Tighten Crypto Regulations

Lawmakers are expected to vote on a ban on large cryptocurrency transfers from anonymous self-hosted wallets, according to documents. The proposed anti-money laundering plans will be voted on by the European Parliament’s Economics and Civil Liberties Committees on March 28, following months of discussions on how to prevent cryptocurrencies, non-fungible tokens (NFTs), and the metaverse from being used for financial crime.

As per the latest proposal, traders would be prohibited from conducting or receiving anonymous cryptocurrency transfers exceeding 1,000 euros ($1,080). However, transactions involving regulated crypto providers or verified customer identities would be permitted. The original version of the law was more stringent, but it was relaxed during an internal meeting on March 22.

The proposed legislation would permit crypto transfers between private individuals, including large payments made between friends. However, the law prohibits businesses from accepting cash payments exceeding 7,000 euros and establishes a new EU anti-money laundering agency, the AMLA.

For the proposed measures to become law, they must be approved by both the EU Parliament and the European Council, which represents the member states of the bloc. In the past, the Council had proposed a ban on banks and crypto providers dealing in privacy-enhancing coins such as zcash, monero, and dash, putting them on the same level as anonymous financial instruments like bearer shares.

EU Proceeds To Eliminate Risks Of Crypto Mixers

One of the countries which is leading the way in this effort is the European Union, which is set to vote on a proposal to ban large anonymous transactions involving cash or crypto. The move has sparked a heated debate, with some arguing that it could stifle innovation and undermine the growth of the crypto industry.

However, proponents of the ban argue that it is necessary to prevent money laundering and other illicit activities and that the risks associated with cryptocurrencies must be taken seriously. They point to the fact that cryptocurrencies are often used in illegal activities such as drug trafficking, terrorist financing, and money laundering.

The European Parliament’s draft legislation does not seem to go as far as banning privacy-enhancing coins, mixers, and tumblers altogether, but it does prohibit anonymous crypto accounts and considers the use of such tools as additional factors when evaluating money laundering risks.

If the parliament’s plans are enacted, EU crypto providers would be barred from having a correspondent relationship with any unregistered or unlicensed foreign provider. The proposed regulations also subject NFT platforms to anti-money laundering rules and bring decentralized autonomous organizations (DAOs) within the scope of the regulations as long as they are controlled by an identified person.

Despite the controversy, there is widespread agreement that something needs to be done to address the challenges posed by the use of cryptocurrencies in illegal activities. The key question is how best to balance the need for regulation and control with the need to foster innovation and growth in this rapidly evolving sector.

Whatever the outcome of the EU vote, it is clear that the crypto industry is facing a critical juncture in its development. As regulators around the world continue to grapple with the challenges posed by digital assets, it will be up to industry leaders and innovators to find new and creative ways to navigate this ever-changing landscape.

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