Cryptocurrency business regulation issues

The EU plans to create an "Anti-Money Laundering Authority." This body will regulate cryptocurrencies. Negotiations between representatives of the European Council, the European Commission, and the European Parliament on this issue are scheduled for early September. In this article, we will discuss the state of affairs regarding global regulation of crypto businesses in different parts of the world.

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Despite global economic challenges, the past six months have seen a surge in global interest in cryptography. All interested digital asset market players, from large companies to ordinary users, are developing their strategies.

The industry is developing rapidly, so information is increasingly emerging about governments' desire to take control of the crypto business.

What measures are being taken in the US?

In the US, UK and Asian countries, regulatory authorities are paying a lot of attention to this.

Thus, in March 2022, US President Joe Biden signed an executive order to ensure the responsible development of digital assets. The objectives of this directive are:

• ensure responsible development of the crypto industry;
• ensure consumer protection and financial stability;
• create conditions for combating illegal activities.

Overall, US lawmakers and crypto advocacy groups reacted positively to the decree. It's well known that the market capitalization of non-state digital assets has grown from $14 billion to $3 trillion in five years. Therefore, many believe consistent oversight of the industry is essential.

According to American experts, the lack of actively applied market regulation makes innovation risky.

However, most agree that combating money laundering through the crypto market is a difficult goal to achieve in practice, especially given the constant, rapid changes in cryptographic technology.

The most advanced cryptocurrency countries

It should be noted that according to the Coincub Global Crypto Ranking research for Q1 and Q2 2022, the United States and Germany share the top spot in the ranking of the most crypto-friendly countries.

Switzerland is also among the leaders. This is no coincidence, as it was in Lugano that Bitcoin and Tether were recognized as legal tender. This Swiss city also issued its own coin, LVGA Points, which can be used instead of CHF.

Interestingly, the best taxation conditions for cryptocurrency businesses in the EU countries are in Hungary.

The issue of crypto-asset regulation in the EU

In the European Union as a whole, the topic of cryptocurrency market regulation is being actively discussed. For example, back in the spring, the EU lobbied for global regulation of cryptocurrencies for security and environmental reasons.

In early May, European Union Financial Services Commissioner Mairead McGuinness called for a "global agreement on cryptocurrency." The primary goal is to protect investors and limit the negative environmental impact of mining.

Four months later, reports appeared in the press that the process of introducing comprehensive rules for crypto assets was in its final stages.

Regulations for overseeing the circulation of digital assets have already been introduced, which has become a topic of discussion among token users. However, this initiative is only part of a broader legislative agenda aimed at combating money laundering (AML).

Anti-Money Laundering Office

The European Union is on the verge of creating a new regulator to oversee cryptocurrency. In accordance with a package of laws aimed at combating money laundering, the EU is prepared to establish an "Anti-Money Laundering Authority."

The initiative is being implemented within the framework of EU policy on regulating cryptocurrency markets.

Who is responsible for the creation of AMLA?

The European Commission, the European Council, and the European Parliament are working to create a pan-European body to regulate the cryptocurrency market. Each of the three bodies is expected to submit proposals.

The European Commission (the EU's highest executive body) published its vision back in July 2021. Specifically, it proposed banning anonymous online cryptocurrency exchanges.

The European Council (the EU's highest political body) only outlined its plans for the new regular service a month ago.

The European Parliament (the EU's highest legislative body) is expected to discuss both plans immediately after the summer recess and adopt its version of the regulation. After that, negotiations between representatives of these three bodies will begin.

The European Parliament is known to be the most aggressive in calling for cryptocurrency regulation, so it's unlikely to object to granting a future regulator direct oversight over crypto.

According to analysts, disagreements among European officials regarding the future functions of the regulatory body are minimal. Therefore, establishing direct oversight of cryptoasset service providers in the EU is almost a done deal.

Details of the project are expected to be announced very soon. Overall, it's clear that the regulator will, at a minimum, oversee high-risk crypto firms as financial intermediaries.

When will the Anti-Money Laundering Office be established?

Experts believe the new regulatory body will not begin its work anytime soon. The timing will depend on negotiations.

The project's initiators agree that AMLA must employ highly qualified personnel who are well-versed in the latest technologies required to interact with decentralized networks.

Will cryptocurrency help Russia evade sanctions?

In June 2022, the United Nations Conference on Trade and Development (UNCTAD) released a list of 20 countries with the highest levels of cryptocurrency use among their populations. Ukraine and Russia topped the list.

The West has imposed several sanctions against Russia, which unleashed a full-scale war in Ukraine. These also affected cryptocurrency, as transactions involving it are subject to financial monitoring.

Back in the spring of this year, the EU began working on developing a set of measures to prohibit Russia's use of digital assets.

As a result, due to the limited market, the use of payment tracking mechanisms on exchanges, and the closure of some illegal platforms targeting Russian audiences (Hydra Market, Garantex Europe OU, etc.), it has become much more difficult for the aggressor country to conduct trade and business in circumvention of Western sanctions.

It is also known that OpenSea, a platform for issuing and trading NFTs, has begun blocking and deleting Russian user accounts without notice or subsequent explanation.

Binance, the largest crypto exchange, has restricted access to its services for users living in Russia and holding assets totaling over €10,000. Clients can only withdraw funds.

Binance is actively supporting Ukraine. The exchange has donated $1.2 million to support Ukrainians, making it one of the largest donations made by a private company to our country.

Conclusion

The popularization of digital assets has logically led to the need to prevent risks to the financial stability of businesses, mobilize internal resources, and secure the monetary systems of countries with developed economies.

One thing is clear: global regulation of cryptocurrencies for the sake of security is inevitable. But, in all likelihood, the process of creating a legal framework for the use of digital currencies will proceed in parallel with the development and transformation of the crypto market. Whether cryptocurrency will lose its core value—independence—in the process remains to be seen.