BitOoda Global & Regulatory Analysis, 1/6/2020: Focus on Europe

This coming week, Europe’s 5th Anti-Money Laundering Directive (AMLD5) goes into effect, requiring crypto-to-fiat firms (exchanges) and custodians to implement baseline AML programs and bringing EU-wide regulation closer to U.S. standards. Already, several digital asset firms have shut down in anticipation of having to implement these more stringent AML/KYC procedures, and the advent of this new regime raises several broader questions about the direction of digital asset regulation in Europe, namely the continued balance between privacy and security, and the challenge of navigating EU-wide vs. country-by-country rules.

On the question of state vs. EU rules, this is particularly challenging for anyone trying to navigate multiple national and multinational jurisdictions. While AMLD5 imposes certain baseline requirements, individual countries are implementing the directive differently, sometimes using stricter standards than the directive calls for. For example, the Netherlands legislation imposes a new licensing requirement on Dutch crypto firms that goes beyond the EU guidelines, causing Deribit and other firms to raise objections. Malta — an early crypto haven that successfully attracted firms like Binance and OKEx with its dedicated crypto regime — also will have to modify its compliance requirements.

On the privacy issue, AMLD5 prohibits anonymous transactions on crypto exchanges, and custody providers must obtain full user identification information. We have previously analyzed the inherent tension between crypto’s fundamental thrust toward decentralization and the gradually tightening noose by regulators to prohibit the use of cryptocurrencies for illicit activities, which is now being raised again in the context of this EU directive. Our read here is that AMLD5 does not swing the global pendulum significantly in either direction, and so this friction — while certainly continuing to linger — will not lead to tangible regulatory or market impacts.

Although AMLD5 itself does not significantly raise the bar on global crypto requirements, it poses challenges and opportunities for U.S. firms like BitOoda as we continue to pursue opportunities across the Atlantic. As always, we will rely on our deep U.S. regulatory stack, our strong focus on compliance, and our unmatched global expertise to ensure we identify and execute the best deals for our clients. We see potential opportunities emerging on the continent as governance structures modernize to meet U.S. standards, which could enable us to form new partnerships and broaden our engagement on a range of fronts.

Contact us at with questions about the impact of AMLD5 or to discuss BitOoda’s engagement strategy in Europe.

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