The EU has proposed new laws in the fight against money laundering. These include regulation of cryptocurrency, which raises concern for traders. Any fears were increased with the blank statements that anonymous crypto wallets would be banned. A quick drop in the market was, though, quickly recovered as the actual rules became clearer.
Regulations
Regulations will have little direct effect on the use of cryptocurrency. For example, it is often used as a safe way to pay at an online casino, or in other online transactions. Yet traders need to be aware of the new rules. New regulations will require the release of cryptocurrencies only to qualified investors. There will be increased enforcement against insider trading, and an attempt to end front running (placing transactions in a queue with knowledge of future transactions). The rules will also cover more types of cryptocurrencies than current rules do, including utility tokens.
White Papers
The end of anonymity is in relation to service providers and issuers. Not all of the information is shared with the public, which is why there is little effect in using cryptocurrency as a legitimate form of currency. What it does encompass is the issuing of white papers that must be submitted to local regulatory authorities. Here the rules are lining up with current ‘Know Your Customer/Supplier’ (KYC/ KYS) rules, which require businesses to verify customers in order to prevent money laundering, identify theft, terrorism financing, etc. On the other hand, there are fewer transparency rules for the customer. Not even the tokenomics, which gives the value of tokens and how quickly they can be sold for a profit, are required to be revealed.
Big Traders Game
Many Crypto traders are already in compliance, but it will make it more difficult for small traders and new traders. Some of the rules, such as the prohibition of interest may feel like an intrusion on financial autonomy. If this rule goes through it could dissuade investment in cryptocurrencies, and give more support to the banking sector. Yet, the rules also give some security that may be necessary for the market to evolve. Until now, there has been nowhere to seek help in cases of theft, malfunctions or cyber attacks. Also, the alternative could be the creation of a central bank, which quells the whole idea of avoiding the control the banks have over the current financial system.
