Analytical center of the European Parliament recommends European regulators to expand the definition of cryptocurrencies and elaborate financial laws for crypto assets regulation.
The European Parliament research unit has pointed in its report that the European Union (EU) has to expand requirements for companies, working with cryptocurrencies.
According to the Fifth European Union Anti-Money Laundering Directive (AMLD5), cryptocurrency exchanges and custodial services must register with regulators and comply with KYC / AML procedures, but researchers consider this directive being outdated. According to them, Financial Action Task Force on Money Laundering (FATF) sets tougher international standards. Cryptocurrency industry is changing actively and the EU should take into consideration different regulatory rules to keep up with its realities.
First of all, the research unit recommends expanding anti-money laundering and combating the financing of terrorism policies (AML / CFT). Taking into account growing number of various tokens, it has been proposed to add them to the “subcategory” of cryptocurrencies. Wherein, researchers think that crypto assets developers and non-custodian wallets may avoid AML following, because they just provide functioning of technological infrastructure.
According to researchers, most financial institutions, working with digital assets, and centralized trading platforms do not fall under applicable law, so they must comply with AML rules. The research center did not ignore miners.
“Today cryptocurrency mining does not demand huge farms with high energy consumption. There is special equipment, allowing all people to mine cryptocurrency at home, and among home miners may also appear criminals”, — it is said in the report with pointing that it is necessary to elaborate regulatory questions related to converting mined coins into fiat currency.
According to the report, cryptocurrencies are characterized by high volatility, they are unstable to market fluctuations, that is why they are risky for investors. Taking into consideration, that for digital assets regulation is not enough existing financial legislation, financial institutions will face problems while working with cryptocurrencies.
Today European low do not forbid companies to store cryptocurrencies or provide services related to digital assets, even if these companies may suffer losses due to high cryptocurrencies volatility. As researchers consider, the best solution of this situation is to prohibit financial institutions to use cryptocurrencies.
“Cryptocurrencies do not fall within the scope of the MiFID II EU Directive “On Financial Instrument Markets” and EMD2 regarding electronic money, also they do not subject to financial regulation of the European Union. So, investors must be aware about all potential risks connecting with digital assets”.
On the other hand, according to the director of the cryptocurrency direction of the Stuttgart Stock Exchange, the AMLD5 directive only increased interest in crypto assets among institutional investors.