In July 2016 the European Commission (EC) presented an “Action Plan for strengthening the fight against terrorist financing” proposing a set of strict rules on cryptocurrency regulation within an expanded framework of EU’s anti-money laundering (AML) directive. These proposals will impose tighter regulations on digital currency platforms to prevent their use to fund terrorist activities by tracing terrorists and preventing them from moving funds and assets. The providers will be obliged to monitor transactions and users the same way banks do, including disrupting all sources of revenue that might be used to finance terrorist organizations.
Read More: Action Plan for strengthening the fight against terrorist financing, European Commission (EC), July 2016
Read More: Questions and Answers: Action Plan to strengthen the fight against terrorist financing, European Commission (EC), February 2016
The measure is also aimed at money laundering and tax avoidance, bringing virtual currency exchanges under the EU’s Anti-Money Laundering Directive. Another important development is the introduction of a legal definition of a cryptocurrency: “…a digital representation of value that is neither issued by a central bank or a public authority, nor necessarily attached to a fiat currency, but is accepted by natural or legal persons as a means of payment and can be transferred, stored or traded electronically.” This definition will have to be integrated into all EU member states’ anti-money laundering legislation from January 1st, 2017 onwards.
EU member states will be required to provide a central register of information of all bank and payment account users for the authorities to have better access when they are suspected of illegal activity. EU and the US have been taking measures in that direction and as early as April 2015 stated in the Communication from the Commission to the European Parliament, the Council, the European Economic and Social committee and the Committee of the Regions that “The EU-US Terrorist Financing Tracking Programme (TFTP) allows Member States to request a search of financial data when there is reasonable suspicion of terrorist activity. To date, TFTP has provided leads relating to numerous terrorist suspects and their support networks.”
These changes are addressed primarily at the open source cryptocurrencies, which allow anonymous transactions. Being a centralized reserve cryptocurrency, OneCoin already complies with all the new regulations, preventing individuals from engaging in criminal and unwanted behaviour. OneCoin monitors its clients and implements rules aligned with the legal development. For example, to prevent money laundering, identity theft, financial fraud and terrorist financing, OneCoin has implemented KYC (know-your-customer) rules, thus disrupting any possible misconduct by its users.
The new action plan is the first coherent attempt of the EU to regulate cryptocurrencies and the exchanges, against the background of their increasing popularity. Earlier this year the Japanese parliament passed legislation regulating the cryptocurrency exchanges by requiring them to register with the country’s financial watchdog – the Financial Services Agency (FSA). The Russian government went further, announcing plans to create state-controlled national digital currency, that is rumored to combine features from public and private blockchains.