Limitations of Bitcoin and Anti-Money Laundering Rules in Europe

Dec 05, 2019 at 08:43 // News
Coin Idol
Europe limits Bitcoin with anti-money laundering rules

The use of Bitcoin and other cryptocurrencies is still difficult to control and requires scrupulous assessment for any reports to Italian authorities. For now, cryptocurrencies for transactions subject to traceability requirements can be used within the limits of cash. Let's give some light to the recent anti-money laundering (AML) regulations.

As long as the regulatory framework is not complete, the use of cryptocurrencies in transactions that require the tracking of financial flows remains confined to the cash threshold. The use of cryptocurrencies is in fact scarcely controllable by the national authorities in charge of this and requires the professional to carry out a careful risk assessment for the purpose of reporting a suspicious transaction.

The Nature of Cryptocurrencies

The use of cryptocurrencies is spreading also in sectors other than those of online purchases and cases of real estate sales and corporate transactions carried out with the exchange and use of cryptocurrencies are documented, Italians are faced with a sort of "Digital cash".

Instead, the exchange and the wallet providers perform services similar to those of currency exchange, money transfers and in general those provided by payment service providers, long considered among the subjects obliged to comply with AML legislation, therefore the extension of objective and subjective AML obligations was somewhat predictable.

When the parties intend to use a cryptocurrency, the professional operator is faced with two main problems: how to comply with the rules on the limitation of the use of cash (Article 49 of Legislative Decree No. 231/2007); how to carry out the analytical indication of the means of payment (pursuant to article 35, paragraph 22, decree-law 4 July 2006, n. 223).

A lively debate is still under way on the legal nature of bitcoins and cryptocurrencies in general: according to some, these new forms of e-money, or "automatic currency", could be classified as financial instruments or intangible assets, while others believe they consist in payment instruments and the different classification leads to results that are not superimposable from the point of view of the applicable legislation.

The thesis currently most accredited is that which assimilates cryptocurrencies to payment instruments and complementary currencies; thesis accepted by the European Court of Justice itself and by the Revenue Agency (res. No. 72 / E of 2016).

The main point of friction between the virtual currencies and the anti-money laundering legislation is their complete anonymity: the use of the so-called blockchain technology, in fact, guarantees with the distributed register the impossibility of double spending and the IT tracking of the transaction, but the fact that the cryptographic keys that allow the use of cryptocurrencies remain anonymous.

The Relationship with AML Regulations

Hence the need, for the purposes of compliance with the AML legislation, that their circulation takes place through professional operators (exchange and wallet providers) who carry out identification checks of the holders of their accounts.

From November 10, 2019, the new AML regulations regarding cryptocurrencies, exchange and wallet providers came into force, a sign of the legislator's attention to this world for the possible phenomena of money laundering (ML) that may affect it.

The legislator is well aware that the possibility remains to transfer cryptocurrencies out of the regulated circuits, for example through the mere transfer of the physical wallet that contains them, or through service providers who have their establishment in countries that do not provide for any obligation to identification of its users.

Therefore, as long as the regulatory framework is not complete, the use of virtual currencies in real estate transactions or that in any case require the tracking of financial flows remains confined within the narrow threshold set for cash; the use of cryptocurrencies for higher amounts will be allowed when it will be possible to carry out the analytical indication of the means of payment by making use of operators who respect the aforementioned sector regulations.

In any case a careful assessment of the riskiness of the case by the professional is always necessary since the virtual currencies circuit is in fact scarcely controllable by the national authorities in charge of this and consequently the opportunity to make a suspicious transaction report for ML purposes.

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