A group of EU nations have reportedly been lobbying to entrust oversight of the crypto space to a new anti-money laundering (AML) agency. Behind the move are concerns that companies dealing with digital assets can be engaged in the processing of illicit funds.
Germany Leads Effort to Bring Crypto Firms Under EU Anti-Money Laundering Supervision
Several EU member states, led by Germany, have urged the European Union to grant a planned anti-money laundering (AML) watchdog powers to monitor businesses in the crypto sector. Citing knowledgeable sources, Bloomberg revealed that these countries are concerned that cryptocurrency companies are being used to process illegally obtained funds.
EU authorities, such as the European Commission (EC), are now negotiating over the design of the regulatory body, expected to launch in 2024 and expand its operations in the next two years. Said group is seeking to ensure a more explicit inclusion of crypto firms in the watchdog’s responsibilities, according to an EU diplomat who, like the other sources for the article, chose to remain anonymous.
The European Union is preparing to establish the new agency after a series of scandals in recent years revealed loopholes in the bloc’s regulatory framework allowing the flow of dirty money. Meanwhile, the booming crypto market has opened a new front for law enforcement, as the anonymity associated with digital assets allegedly attracts criminals and rogue states.
Spain, Austria, Italy, Luxembourg, and the Netherlands are among the nations rallying behind Germany in the initiative. They insist that the new European watchdog’s remit should cover the riskiest cross-border entities among banks, other financial institutions, and crypto service providers, the diplomat unveiled. The EC’s proposal from July 2021 only indirectly refers to “virtual assets.”
The executive body declined to comment and member states have yet to discuss the idea. The quoted officials noted that it is still unclear whether the changes will win broad support. Furthermore, the European Parliament will have the last word on the legal texts. One of the lead European lawmakers for the proposal, Luis Garicano, said:
It is key that the scope of the new EU authority explicitly includes crypto assets, given that this is one of the fields more prone to money laundering activities.
Currently, national authorities are responsible for combating money laundering in the EU, which limits their effectiveness and raises questions about their independence. Europe’s financial system has been embroiled in several major scandals over the past decade, including the laundering of Russian money through the Baltic operations of Danske Bank and Latvian bank ABLV.
According to the blockchain forensics company Chainalysis, illicit transactions have spiked by 80% to an all-time high of $14 billion last year. Yet crime-related flows still represent a small share of all crypto transaction volume which has also seen a serious increase in 2021.
