The government of the United Kingdom is discussing cryptocurrency-related amendments to the European Union’s 4th Anti-Money Laundering Directive. Responding to an inquiry posed by MP Chris Evans (Islwyn) on the UK Parliament website, Stephen Barclay, economic secretary to Her Majesty’s Treasury, explained:
“The UK government is currently negotiating amendments to the 4th Anti-Money Laundering Directive that will bring virtual currency exchange platforms and custodian wallet providers into Anti-Money Laundering and Counter-Terrorist Financing regulation, which will result in these firms’ activities being overseen by national competent authorities for these areas. The government supports the intention behind these amendments. We expect these negotiations to conclude at EU level in late 2017/early 2018.”
Formalizing EU-wide know-your-customer regulation for cryptocurrency could go a long way to catching tax evaders and tracking the movement of illicit funds. After relevant legal standards are established, the next step could be hiring blockchain investigation firms. For example, in the United States, Chainalysis has been contracted by the Internal Revenue Service, among other government agencies.
British regulators, in particular, have been very forward-thinking in their approach to cryptocurrency.
First, in September 2017, the UK’s Financial Conduct Authority (FCA) published a warning about the risks of token offerings, which it called “very high-risk, speculative investments.” Next, in an October 2017 report on its regulatory sandbox, the FCA shared that firms working with distributed ledger technology faced “pronounced” difficulties in obtaining banking services. Then, in November 2017, the FCA cautioned consumers about cryptocurrency contracts for differences, worrying about their opacity and potentially exploitative fee structure.
Given the flurry of activity by the FCA, it makes sense that the UK is leading the charge for cryptocurrency regulation throughout the European Union. Even as the president and vice president of European Central Bank scoff at cryptocurrency markets, some officials are closely monitoring the situation.