Crypto taxes: a boon for Europe?

The European Union has decided to limit cash purchases to €10,000. The EU hopes to ensure greater scrutiny of cryptocurrency transactions above €1,000. Members of the bloc announced it on December 7, saying it was part of efforts to prevent money laundering.

New Rule Aimed at Closing Cryptocurrency Gaps

Czech Finance Minister Zbyněk Stanjura said the intention is: close loopholes and apply even stricter rules in all EU Member States“. Large cash payments of more than 10,000 euros will consequently become impossible. Trying to remain anonymous when buying or selling crypto assets will become much more difficult.

New Anti-Money Laundering and Counter-Terrorist Financing rules impose on Crypto Asset Service Providers (CASP). To do this, the idea is in particular to exercise due diligence with regard to customers carrying out transactions above €1,000. Self-hosted wallets are expected to step up their risk mitigation measures due to the arrival of PSAPs. The EU also uses the country classification system based on the recommendations of the Financial Action Task Force (FATF). The objective is to determine the risk of money laundering in each member country.

What impact will this have on DeFi?

Regulators could likely target DeFi platform developers. It is unclear how the new requirements will be implemented, as anonymity is integral to the existence of the DeFi space. However, this may have no impact if the entity is not based in Europe and chooses not to comply. It might even be more difficult if a central entity does not control the DeFi protocol.

The risks of DeFi and how to regulate the sector are under consideration by regulators in Europe. A few months ago, the European Central Bank commissioned a study. This study recommends that DeFi regulation cover DAOs, platform developers, and governance token holders.

Such a measure could affect the growth of the DeFi sector in Europe. But centralized crypto platforms will have no problem complying. Indeed, they already implement anti-money laundering and anti-terrorist financing standards. European regulators are also questioning whether MiCA regulations can prevent a repeat of FTX’s collapse.

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