New anti-money laundering (AML) rules will enter into force in Europe on 10 January. The rules that deal with cryptocurrency companies for the first time are likely to have a major impact on the industry.
The Fifth Money Laundering Directive (5AMLD) is due to take effect in less than a month. It was first described in detail in May last year.
For the first time, the rules define what is meant by the term virtual currency:
“… a digital representation of the value that is not issued or guaranteed by a central bank or government agency.”
The regulations oblige those who offer custody services for virtual currencies to comply with the AML regulations defined under 4AMLD. This means that exchange platforms that offer services within the European Union must transmit information about customers to the responsible authorities and carry out a due diligence check for suspicious user activities.
Dramatic impact on the industry
This will have a dramatic impact on the industry. As reporter Larry Cermak (@lawmaster) emphasizes, Binance and OKEx – two absolute stock market giants in the industry – will suddenly have to follow the new regulations or stop their services for Europe.
Binance, one of the most consistent exchanges due to its high payout limits with no customer review, would need to revise its own policies. Currently, users can withdraw two BTCs without a KYC check. For example, this is clearly not in compliance with the AML regulations. Alternatively, the company could choose to completely withdraw its services from the EU.
Given the increased regulatory pressures from some countries, Binance has already shown that it is willing to compromise to continue offering services in key global markets. At the beginning of the year, the platform suddenly pulled out of the United States before launching Binance US – a greatly reduced but regulatory-compliant platform for American users.
Some companies have already closed due to upcoming regulatory measures. BottlePay, for example, said last week that the new regulations would make it impossible to continue offering the social media tip service in a manner consistent with its current operations. The company announced in a press release that it would cease operations at the end of the year. Other companies like Simplecoin and Chopcoin have had a similar experience.
While the regulations are sure to rock European cryptocurrency companies, some seem to welcome the change as well. Valeriya Kolomiychenko of the “EXMO” digital asset trading platform, for example, writes in a medium post that the new rules would offer more security – something that many crypto companies have been waiting for for years.