The European Parliament on Wednesday passed a new package of laws strengthening anti-money laundering requirements for crypto. But these rules seem to be based on questionable assumptions more than on proven facts.
Strengthening requirements for crypto players
The recent regulatory framework significantly increases the vigilance and reporting requirements of digital asset service providers (CASPs) for transactions involving self-hosted wallets.
CASPs will therefore have to put in place reinforced identity verification measures (KYC) for any transaction exceeding €1,000. Regulations forbidden de facto for PSAPs to offer privacy-preserving assets.
Suppliers of self-custody software and hardware solutions nevertheless remain exempt. Parliament considers that “the anonymity inherent in certain cryptos exposes them to risks of money laundering and terrorist financing”. Yet the vast majority of criminal activities continue to evade authorities despite existing AML frameworks.
Regulations based on questionable assumptions
Indeed, none of the reports from supervisory bodies (FATF, IMF, World Bank) seem to provide conclusive evidence on the real extent of the role of cryptocurrencies in money laundering. Many, on the contrary, point out a glaring lack of reliable and verifiable data on the subject.
L'study of MONEYVAL on AML typologies in virtual assets thus recognizes that risk analyzes rely heavily on declarations from the private sector itself, with little verification from supervisors.
The World Bank is calling for a more in-depth study of cryptocurrencies. Estimates of the share of illicit transactions vary enormously, from 0.34% to 46% depending on the source, highlighting the lack of consensus.
The tightening of European AML regulations on cryptos therefore seems above all motivated by the precautionary principle, in the absence of conclusive data on the real risks.
It will be crucial to ensure that these new rules, with potentially significant implications for privacy and individual freedoms, are proportionate and justified on the basis of tangible elements. Otherwise, the EU could undermine innovation without effectively curbing money laundering.
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