European Crypto Firms Brace for Higher Costs as AMLD5 Takes Effect

[Lucius]

January 10 was the day the Fifth Anti-Money Laundering Directive was due to take effect in the EU, but this does not seem to be the case in all the member states because of the complexity of the procedure and the different approaches that EU members have to this directive. However, it is only a matter of time before the directives will have to be respected across the EU, which means that almost every anonymity when it comes to cryptocurrency becomes the past.

What just happens is that some businesses are simply closing their doors, others will try to relocate and third will try to adapt to new rules. It should be emphasized that it is not just KYC that becomes mandatory, but also that the costs of checking and registering the businesses that want to do business with crypto are increasing.

I think in the long run such measures can have a good effect, but in the short term, it will make the EU an undesirable destination for crypto-related companies.

More info : AMLD5 Takes Effect

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[squatter]

What just happens is that some businesses are simply closing their doors, others will try to relocate and third will try to adapt to new rules. It should be emphasized that it is not just KYC that becomes mandatory, but also that the costs of checking and registering the businesses that want to do business with crypto are increasing.

I think in the long run such measures can have a good effect, but in the short term, it will make the EU an undesirable destination for crypto-related companies.

The increased compliance costs = increased barriers to entry for businesses. Lots of smaller services are shutting down (or will shut down), and fewer will come online from now on. This is great for huge companies like Coinbase, who can afford the increased compliance costs. They welcome burdensome regulation because it creates a less competitive market. That means increased market share for them.

All in all, it's terrible for the industry. What positive long term effects do you see resulting from this? I don't see any.

[avikz]

It's not entirely a bad thing. Because this is the first time, a definition of cryptocurrency is given in the AMLD directive and it says,

Digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency and does not possess a legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored and traded electronically.

Reference: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32018L0843 (The English version of the document is available here)

So this is essentially a good thing for the crypto market in the long run for those who want to use cryptos within the legal limits and don't want to indulge into illegal transactions! At least crypto is being recognized in legal documents which can pave the way into better legal framework!

[Lucius]

All in all, it's terrible for the industry. What positive long term effects do you see resulting from this? I don't see any.

What can be positive in the long run is the fact that it will no longer be easy to start a business related to cryptocurrency without knowing exactly who is behind everything, which would mean less opportunity for scam people and run with the money. While some will not agree that increasing government interference is good for crypto, I do not see Bitcoin as something that can move forward without adapting to existing and new regulations.

I do not know if you read the article, but regarding your question :

On the plus side, the long-term effect should be greater trust in crypto from financial institutions in Europe. In particular, it should make banks more open to providing their services to crypto companies and attract more institutional capital. “It’s part of a global trend to bring crypto in line with traditional finance; crypto is part of the global financial system, even if it doesn’t realize it yet,” Jones said.

In addition to what I've already written, I think it makes sense - but at the same time, it causes some discomfort to all existing businesses and puts all users under some pressure, because most still wonder what the new directive actually means to all of us.

[LeGaulois]

Where are all the persons praising Europe as the crypto heaven when Binance moved to Malta, followed by Bittrex.

All the Fintech companies (cryptos related or not) seem far less receptive to anti-money laundering issues. They started to wake up only recently.
We weren't surprised to see businesses related to cryptos included in this directive, let's be honest it was a matter of time before it happens.

The good thing is, in the long run, we will see the Darwin theory effect. Actually, in Europe, there are countries where you can create a company without knowing where the country is on a map.

Because this is the first time, a definition of cryptocurrency is given in the AMLD directive and it says,

The previous AMLD was from 2014-2015 when cryptocurrency wasn't a thing. At this time they targeted all the "electronic money" means especially the prepaid cards etc. The $250 limit per prepaid card before the KYC was invented by AMLD4

[squatter]

All in all, it's terrible for the industry. What positive long term effects do you see resulting from this? I don't see any.

What can be positive in the long run is the fact that it will no longer be easy to start a business related to cryptocurrency without knowing exactly who is behind everything, which would mean less opportunity for scam people and run with the money.

I'm a big believer in free markets and principles like caveat emptor. Common sense always told me to stay away from anonymous, fly-by-night companies. To me, you're just rationalizing nanny state regulation. There is nothing "positive" about it.

Regardless of AMLD5, fools will continue getting scammed -- that's what fools do. Meanwhile, we the consumers will suffer from an uncompetitive market devoid of small businesses, plus higher fees as established services pass on these increased compliance costs to their customers.

[jseverson]

Where are all the persons praising Europe as the crypto heaven when Binance moved to Malta, followed by Bittrex.

Malta was branded as such precisely because of its regulatory framework, not the lack thereof:

The Authority acknowledged the regulatory challenges that the crypto sector is facing, saying that “the innovations in blockchain and crypto technology present challenges in the prevention of money laundering and terrorism financing.” That’s why the MFSA will employ so-called “SupTech” intelligence tools, which will put regulators in a better position to identify fraud, prevent money laundering, and funding terrorism. In other words, Maltese regulatory bodies will start to take progressive approaches and actively monitor licensed crypto service providers using a more advanced tool.

I imagine the AMLD5 won't change much for larger firms, but I suppose that would depend largely on the added costs. If Malta is already actively implementing these AML regulations though, it's possible that exchanges might not have to adjust much.

I'm a big believer in free markets and principles like caveat emptor. Common sense always told me to stay away from anonymous, fly-by-night companies. To me, you're just rationalizing nanny state regulation. There is nothing "positive" about it.

Well, beyond protecting the public, the article did mention that financial institutions could play nicer with crypto once it all goes down. Whether or not that's a positive thing probably depends on the individual though lol.

[malevolent]

What can be positive in the long run is the fact that it will no longer be easy to start a business related to cryptocurrency without knowing exactly who is behind everything, which would mean less opportunity for scam people and run with the money. While some will not agree that increasing government interference is good for crypto, I do not see Bitcoin as something that can move forward without adapting to existing and new regulations.

Almost every time an exchange gets hacked or 'hacked', finding out who's running the business is not a concern. AMLD5 will do nothing to prevent scams from occurring, what it will lead to is higher regulatory barriers of entry, meaning lower competition, higher fees, lower limits, and a lower quality of service.

[squatter]

What can be positive in the long run is the fact that it will no longer be easy to start a business related to cryptocurrency without knowing exactly who is behind everything, which would mean less opportunity for scam people and run with the money.

Almost every time an exchange gets hacked or 'hacked', finding out who's running the business is not a concern. AMLD5 will do nothing to prevent scams from occurring, what it will lead to is higher regulatory barriers of entry, meaning lower competition, higher fees, lower limits, and a lower quality of service.

The voice of reason has arrived.

I understand that burdensome regulation is inevitable, but this tendency people have to paint it as fundamentally good really bothers me. It's very Stockholm syndrome-esque.