EU Mulls Capping Anonymous Cryptocurrency Transfers

The European Union (EU) is considering the implementation of a cap on anonymous cryptocurrency transactions to combat financial fraud and terrorism funding. The proposed cap is set at $1,083 for transactions where a client cannot be recognized, while the maximum amount for money transfers would be $7,585.

The measures are part of a larger push for improved openness in the banking industry and will be subject to negotiations before being approved at a plenary meeting in April.

The EU’s initiative is a response to the ease with which cryptocurrency transactions can be conducted anonymously, making it difficult to track illegal activities. The new rules aim to enhance transparency and responsibility in the cryptocurrency industry.

The European Authority against Money Laundering (AMLA), established in June 2022, will be responsible for enforcing the new laws. The AMLA has emphasized the need for close coordination between the regulatory regime and national authorities, and has demanded proactive oversight of high-risk financial services and cryptocurrency service providers that operate across multiple member nations.

Lawmakers overwhelmingly adopted the language dealing with unnamed instruments, particularly crypto, with 99 votes in favor, 8 opposing, and 6 abstaining. The EU’s measures are part of a larger effort to increase financial regulation.

Prior to this, the Central Bank of Europe had warned of the dangers of virtual currencies to financial stability and urged an international approach to regulation. The EU’s measures also follow similar efforts by other nations, including China, to strengthen controls on digital currency assets.

The draft proposal stipulates that companies providing services for crypto assets must identify themselves with relevant authorities, perform proper client checks and notify authorities of any unusual activity. The EU also intends to create a new institution to oversee the implementation of these laws in all member nations.

While the plans have received support from the finance industry, others have expressed concerns about the potential impact on confidentiality and the practicality of implementing the new standards. Nevertheless, the EU’s measures are part of an ongoing commitment to combat money fraud and terrorist funding, and the proposed cap on anonymous cryptocurrency transactions represents one phase of this effort.

The proposed laws attempt to align the cryptocurrency industry with conventional financial entities and may promote institutional investors’ use of cryptocurrencies. Several experts caution that these laws may potentially hinder innovation and entice companies away from Europe in favor of nations with more tolerant crypto regulations.

However, the industry and leading actors such as Canaan Inc. (NASDAQ: CAN) need clear regulatory policies that can enable the companies to make long-term plans with the certainty that the rules under which they operate are stable and support their growth.

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