The European Parliament may soon decide whether to adopt a proposal to broaden the regulation for cryptocurrency businesses to embrace practically all transactions. The rule is an anti-money laundering (AML) regulation that applies to regular banking as well. It simply requires financial companies to reveal information on the sender and receiver in a transaction, such as date of birth, ID, or account number. The EU Parliament has suggested removing a 1,000-euro barrier below which cryptocurrency exchanges are not required to collect and share this information. If authorized, crypto exchanges would be required to declare every single crypto transaction, regardless of the size.
This policy may limit some of the benefits of being a disruptive technology while being subject to all of the regulations that apply to traditional financial services. Reporting every transaction, even for a single penny, with all of the information that is usually required will be difficult, but it appears that a solid, robust, and automated know your customer (KYC) program is the best, if not the only, solution, given that crypto transactions can occur 24 hours a day, seven days a week.
Another difficulty for crypto exchanges in complying with this law is that their digital assets are not necessarily as traceable as traditional assets, and they do not have the service offerings from third parties that traditional financial derivatives and securities have. "Some currencies are not covered by transaction monitoring systems." While the law is well-intended and essential to implement AML safeguards, industry experts are concerned about the impact it may have on European Union-regulated exchanges, which will be subject to tighter requirements than unregulated exchanges outside of the EU.
Another major law, maybe more popular in the sector, is the Markets in Crypto Assets (MiCA), which may be authorized shortly. MiCA seeks to eliminate regulatory arbitrage across member states by establishing a unified layer of regulation at the EU level. This is a positive thing, and it will assist to have a single set of laws across the EU. The bill is currently being negotiated, and while much of the wording has been agreed upon among EU institutions, a few amendments are possible before the ultimate ratification.