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2018 – Problem and Promise of Cryptocompliance in Europe

In the first two part of this three-part post, we examined “cryptocompliance” as an emerging focus of various Asian regulators, click here. Next, we analyze European (and intergovernmental) attitudes. As will become clear, there is perhaps a healthy blend on display between “cryptocaution” and “cryptofriendliness.” Countries such as the UK and France are making an effort not to unnecessarily repress the innovation that could potentially change our global economic system for the better and lead us into a new and improved digital future.

European Council amends AML Directive to include cryptocurrencies

The executive arm of the European Parliament, the European Council, agreed in December 2017 to the proposed Fifth Money Laundering Directive (“MLD5”), which includes measures targeting exchange platforms for virtual currencies. Specifically, MLD5 clarifies that cryptocurrency exchanges and custodian wallet providers fall expressly within the scope of the Fourth Money Laundering Directive (“MLD4”). This is important because exchanges and wallet providers, key players in controlling access to cryptocurrencies, are now required to provide information to authorities identifying the beneficial ownership of virtual currency. This increase in transparency should improve the detection of suspicious cryptocurrency transactions and thwart potential money laundering, tax evasion, and anonymous funding of terrorism. MLD5 was formally adopted on May 14, 2018.

FATF monitoring the use of cryptocurrencies for money laundering

The Financial Action Task Force (“FATF”), a 37-member intergovernmental organization founded in Paris, France in 1989 on the initiative of the G7 to develop policies to combat money laundering and, since 2001, terrorism financing, has begun monitoring the criminal misuse of cryptocurrencies. At its plenary meeting in Paris in February of this year, FATF discussed the need to revise its own international standards to meet the growing money laundering risks related to virtual currencies.

Her Majesty’s Treasury launches inquiry into digital currencies and decentralized ledger technology

Also in February of this year, the House of Commons-appointed Treasury Committee launched an inquiry into the role of digital currencies in the UK, including the opportunities and risks that digital currencies may bring to consumers, businesses, and the Government. The inquiry will explore an appropriate regulatory response to digital currencies by Whitehall, Westminster, the Financial Conduct Authority, and the Bank of England, principally in the context of anti-money laundering and counter-terrorist financing legislation. Interestingly, the terms of reference for the inquiry include analyzing how regulation might be balanced to adequately protect consumers and businesses without stifling innovation.

France convenes working group to prevent money laundering and tax evasion

In March of this year, France’s Minister of the Economy, Bruno Le Maire, convened a working group to examine how to regulate cryptocurrencies to prevent their use for tax evasion, money laundering, and terrorist financing. The group is being chaired by Jean-Pierre Landau, Deputy Governor of the Central Bank of France. The working group is aiming to draft a regulatory framework and accompanying guidance in time to be discussed at the G20 summit in Buenos Aires later this year. Le Maire’s efforts to regulate cryptocurrencies appear to be part of a play by France to become a hub for ICOs. Indeed, French news website Numerama has reported Le Maire as saying“France has every interest in becoming the first major financial centre to propose an ad hoc legislative framework that will allow companies initiating an ICO to demonstrate their seriousness to potential investors.”

© Copyright 2020 Squire Patton Boggs (US) LLPNational Law Review, Volume VIII, Number 149



About this Author

Richard Gibbon Criminal Defense Attorney Squire Patton Boggs Dubai, United Arab Emirates

Rich Gibbon is a partner in our Government Investigations & White Collar Practice and focuses on white collar criminal defense, regulatory enforcement and internal investigations. He has been based in the Middle East for 11 years and has extensive experience managing crises and counselling boards of directors and senior management across the Middle East and Africa, Levant, Europe, and South Asia through multi-agency, multi-jurisdictional financial crime investigations and enforcement actions. This includes multinational corporates in connection with anticorruption regimes and a...

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Elizabeth Weil Shaw attorney Squire Patton Boggs

Elizabeth Weil Shaw assists clients primarily with government enforcement actions and inquiries, as well as internal investigations and compliance reviews. Liz has analyzed matters involving investigations by the US Securities and Exchange Commission, Department of Justice and State Attorneys General. She is a contributor to the firm's Anticorruption Blog.