European Commission Directive Could Harshly Affect The State Of Digital Currencies In The EU

By Daniel Zo Bitcoin, European Commission, EU

During the last couple of months, Bitcoin has been the subject of discussion for numerous government meetings, looking for new ways to regulate the digital currency.

According to recent reports, last week, The European Commission published a directive draft including a couple of proposals for the future of Bitcoin. With this in mind, it means to extend anti-money laundering regulation to exchanges and bitcoin wallets. The reason behind this is to help counter tax evaders, fraudsters, terrorists, money launderers, drug dealers and other criminals.

European Commission

If applied, the directive means that all bitcoin companies based in the European Union will be required to apply new regulation onto their clients, while also performing KYC checks on their users to determine whether the funds are coming from legal activity or not.

While the proposal mostly focuses on targeting terrorist financing, which could be done via bitcoin, it’ll likely restrict the anonymity of the digital currency, thus discouraging some people from using it. In the directive draft, it was stated that: “Transactions with virtual currencies benefit from a higher degree of anonymity than classical financial fund transfers and therefore entail a risk that virtual currency may be used by terrorist organizations to conceal financial transfers. Possible further risks relate to the irreversibility of transactions, means of dealing with fraudulent operations, the opaque and technologically complex nature of the industry, and the lack of regulatory safeguards.”

Additionally, it the directive also states that: “To prevent misuse of virtual currencies for money laundering and terrorist financing purposes, the Commission proposes to bring virtual currency exchange platforms and custodian wallet providers under the scope of the Anti-Money Laundering Directive. These entities will have to apply customer due diligence controls when exchanging virtual for real currencies, ending the anonymity associated with such exchanges.”

This doesn’t only mean that bitcoin companies such as exchanges and wallets will need to carry out tougher verifications, but clients will be subject to constant privacy violation, which is not what bitcoin stands for.

While the proposal doesn’t explain exactly what services will be applied and to what extent these regulations will be applied to normal users who do not own hundreds of thousands of dollars-worth of bitcoin, it’ll surely change the way the digital currency is seen in all EU countries.

However, there’s also good news, as to be applied, the proposal still needs to be approved by the European Parliament. As the proposal is still in its draft state, changes can still be made once input is offered from fellow member states. If voted, the directive could be officially published on the 1st of January 2017.

Based on everything that has been outlined so far, what do you personally think about the new European Commission Directive regarding digital currencies? Let us know your thoughts in the comment section below.