The Bitcoin distributed ledger, blockchain is known for its transparency, except for the fact that the identity of the people conducting the transactions on the network is not readily available. However, the same can’t be said for other forms of transactions involving currency notes and other financial instruments. The European Union now wants to bring in new transparency rules to other payments systems and methods as well.
In a recent press release, the European Union announced its intention to curb money laundering, tax evasion, and terrorist financing by introducing new regulations. These regulations will be targeting various payment systems that offer some kind of anonymity or pseudonymity to those making transactions with it. The payments systems featured among the list of likely targets includes prepaid cards, digital currencies, and bitcoin.
With the adoption of a new proposal, the digital currency exchanges operating in the European Union will be subject to a new set of rules that calls for the implementation of stringent Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations. The proposal submitted by the Juncker Commission is the first initiative on the part of the European Union to implement the Action Plan set in the month of February of this year to curb terrorist financing in the region. The Action Plan also focuses on provisions to increase tax transparency and tackle tax abuse.
The first vice-president, Frans Timmermans was quoted in the press release stating –
“Today’s proposals will help national authorities to track down people who hide their finances in order to commit crimes such as terrorism. The Member States will be able to get and share vital information about who really owns companies or trusts, who is dealing in online currencies, and who is using pre-paid cards. Making public the information on who is behind companies and trusts should also be a strong deterrent for potential tax evaders.”
There have been increasing debate in the Europe about the possible use of bitcoin by terrorist organizations. There were speculations about the Paris bombers and Islamic State terrorists using bitcoin to fund their activities. However, it was put to rest by an investigation carried out by the Europol. The report on Europol’s investigation into the terrorist attacks clearly states that the security organization did not find any signs of bitcoin usage among the terrorists. On the other hand, the use of fiat currency still tops the terror funds.
Some of the changes in the existing financial system as sought by the Action Plan includes the following –
a. Countering Terrorism Financing
- Enhancing the powers of EU Financial Intelligence Units and facilitating their co-operation.
- Tackling terrorist financing risks linked to virtual currencies
- Tackling risks linked to anonymous prepaid instruments
- Stronger checks on risky third countries
b. Stricter transparency rules to prevent tax avoidance and money laundering
- Full public access to the beneficial ownership registers
- Interconnection of the registers
- Extending the information available to authorities
These amendments have been included in the Action Plan that was first adopted in the month of February.