EU’s Bitcoin and Cryptocurrency Surveillance Rules to Harm Consumers
The European Union’s final trialogue between Council, Commission, and Parliament has finished crafting the first part of legislation that makes up the new EU anti-money laundering package aligned with the Markets in Crypto-assets rules (MiCA).
These rules are drafted following recommendations from the so-called Travel Rule of the Financial Action Task Force (FATF), a global treaty organization that combats money laundering. The aim of this rule is to effectively track financial assets, and included crypto assets like Bitcoin and other cryptocurrencies beginning in 2019,
The EU’s proposed rules introduce regulations that are far from technologically neutral, are detrimental to innovation, and will harm consumers who depend on cryptocurrency services.
Crypto asset service providers are obliged to keep records and provide traceability from the first euro compared to traditional finance where that requirement is set for transfers larger than 1000 EUR.
Crypto asset service providers will be required to collect information and apply enhanced due diligence measures with respect to all transfers involving non-custodial wallets. A number of risk-mitigation measures will be in place for cryptocurrency exchanges before establishing a business relationship with exchanges in third countries.
Putting such stringent regulations on non-custodial wallets, together with introducing strict and complicated measures for cryptocurrency exchanges, will introduce unfavorable conditions for the growing industry and will cause a number of businesses to be forced and move their operations abroad – depriving consumers of their ability to safely and securely enjoy crypto services.
Putting these high regulatory costs in place is already influencing the decision-making of crypto asset service providers, now considering changing jurisdictions and moving to more favorable ones. These ham-handed regulations won’t only affect the industry, but many of the consumers who rely on them, pushing them to use non-EU exchanges.
We have seen consumers voting with their feet in the past, choosing service providers in different countries to avoid similar measures, and this will be no exception.
With more Orwellian stipulations requiring that a consumer who sends or receives more than 1000 EUR to or from their own non-custodial wallet be verified by the crypto exchange, we will be seeing a number of issues arising both for the industry as well as for the consumers, putting additional costs to all transfers.
The European Union has been criticized in the past for its overregulation especially when it comes to innovative technologies. Even though the EU has been relatively early in creating a comprehensive legal framework for cryptocurrencies, a number of the regulations agreed on will undoubtedly bring harm to both the industry and the retail consumer.
Surveillance of each consumer coupled with copious regulations aimed at crypto asset service providers will once again leave EU citizens looking for alternatives within jurisdictions more open to innovation, decentralization, and consumer-orientated regulatory frameworks.
The entire point of cryptocurrencies is to provide an alternative to the government-controlled fiat money system. These rules aim to disrupt that aim, principally by forcing industry players to comply with even stricter rules imposed on traditional finance institutions.
There is a better way to do this in order to promote innovation, protect consumers, and create a better ecosystem that will benefit all Europeans.
Our Principles for Smart Cryptocurrency Regulations policy primer is available to all regulators, and offers core principles to uphold in order to create regulatory guidance for the nascent industry without hurting innovation.
- Prevent Fraud
- Technological Neutrality
- Reasonable Taxation
- Legal Certainty & Transparency
The temptation to regulate cryptocurrencies and the blockchain economy based on financial considerations alone, rather than the innovative potential, is an active threat to entrepreneurs and consumers in the crypto space.
Penalizing first-movers in crypto innovation or subjecting them to outdated laws will only serve to limit the unparalleled economic growth currently provided by the sector, or risk pushing all investment and entrepreneurship to less reliable and lawful jurisdictions.
The policy primer can be read in full here
The CCC represents consumers in over 100 countries across the globe. We closely monitor regulatory trends in Ottawa, Washington, Brussels, Geneva, and other hotspots of regulation and inform and activate consumers to fight for #ConsumerChoice. Learn more at consumerchoicecenter.org.
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