The European Union is about to set up a brand new regulator to get a better handle on cryptocurrency and its industry. This regulator will be responsible for the entire Union.
Part of anti-money laundering
The yet-to-be-appointed supervisor must fall under AML, short for anti-money laundering. This is a broad package of EU anti-money laundering policies. AML also includes the Markets in Crypto Assets package and the controversial Transfer of Funds regulation.
Last July, the European Commission shared a proposal for the Sixth AML/CFT Directive, or AMLD6. The European Council released its version in June. After the August summer break, the ball is in the European Parliament’s court. After approval, the three bodies of the EU must negotiate the actual implementation.
Agree on spirit legislation cryptocurrency
The three bodies seem to agree on the direction the new legislation should take, namely reducing money laundering through direct supervision of crypto companies in the EU.
The European Parliament has actually always been the most aggressive of the three bodies when it comes to regulating cryptocurrencies. It is therefore unlikely that the parliament will oppose the creation of a new crypto regulator.
Crypto companies become financial services companies
The regulator, also known as the Anti-Money Laundering Authority or AMLA, will at least control “high-risk” crypto companies directly as financial service providers. At least, that’s what the Commission and Council submissions say.
“EU-level supervision consisting of a hub-and-spoke model – i.e. EU-level regulator with authority for direct supervision of certain financial institutions (FIs), indirect supervision/coordination of the other FIs, and a coordinating role for supervision of the non-financial sector as a first step.”
From member states to Europe
A cross-border regulator changes a lot about the current situation. Previous AML directives from 2015 and 2018 set standards for member states to collect and make available data, such as information on beneficial ownership of companies.
Consider, for example, how the Netherlands requires all crypto companies to register (paid) with De Nederlandsche Bank. To get on this register, companies have to comply with a specific set of rules, which only apply to crypto companies that want to offer their wares in the Netherlands (so this also applies to international companies like Binance).
Other countries have different rules, so crypto companies have to make a separate application in each EU country.
Good for European crypto companies
The legal departments of various crypto companies are working overtime due to fragmentation, at least if they want to do business in other European countries.
In that respect, it seems better for the crypto industry to have one regulator in Europe, instead of each country having its own regulator. Whether it is good or bad also depends on the requirements and the costs involved.
AMLD5 established that member states should treat crypto exchanges as financial institutions. But that implementation was thus left to the member states. Some countries interpreted these rules differently than others. The Netherlands was, as always, the good boy of the class, and was very quick to implement registration with DNB.
Pending negotiations
It is not yet 100% clear when the new European regulator can start. This depends on the negotiations between the European Parliament and the subsequent trialogues involving the commission. The implementation of the scheme, including the staffing of the supervisory body, will take years. But there seems little doubt that such a regulator will come regardless.
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