Sunday, December 10

EU to scrutinize crypto payments up to €1000 in an attempt to fight money laundering – concerns DeFi space.


The European Union, on Nov 6, proposed a policy to track and limit cross-border cash transfers for up to €10,000 and scrutinise cryptocurrency transactions up to €1000 in their joint effort to put a check on money laundering.

These limitations and scrutiny on cryptocurrency are meant to hamper the usage of crypto for criminal activities. The member states of the EU will be implementing these rules – no opt-out – but they are given the choice to reduce the limits for cash transactions in their states, as they deem fit. And the lowest limit on cash payments for up to  €1000 is enacted by Spain.

Said the Czech Finance minister, Zbyněk Stanjura, in an interview regarding these restrictions. He further revealed the strictness on cash transactions by adding that now hiding dirty money behind the walls of corporate businesses and laundering with precious jewellery will no longer work in EU states.

According to the new scheme, all crypto sellers are required to keep records of their buyers and sellers. All the companies are directed to conduct research on their customers while conducting transactions for digital currencies like bitcoin – their identity will be verified and any suspicious activity or person will be promptly reported to the concerned authorities.

To curb any hurdles in the way of executing these new rules and limitations and make sure they are observed in all EU states, the European Union has set up a classification system as recommended by Financial Action Task Force.

The virtual asset service providers will be screened by the EU in the same manner as all other EU financial departments are screened – terror financing and anti-money-laundering scrutiny. 

This new directive is expected to clash with the working of decentralized financing (DeFi). DeFi operates on anonymity and the new rules demand all identities be disclosed and verified. It is still not clear how the EU will take on the anonymous existence – the essential feature of DeFi space.

It is likely that Regulators may crack down on DeFi platforms but the mechanism to control DeFi space and validate the crypto firm running it is still not defined. However, the EU is in no mood to give a free hand to DeFI space while centralised firms, dealing with crypto, operating in the EU will keep working normally.

There are concerns around EU over this new policy. Strategies worry that it may hamper the growth of crypto in the region and limiting cash payments to €10,000 will create financial barriers for corporate firms and investors around EU, also those carrying out transactions across the borders.

Nevertheless, the sole purpose of EU to screen crypto payments and cash transfers is to ensure transparent and secure cash transactions.

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