So, January 10 was supposed to be the day the Fifth Anti-Money Laundering Directive kicked in across the EU. But honestly, it doesn't seem like every member state is on the same page due to the complexity and different takes on the directive. Still, it’s only a matter of time before everyone has to fall in line, which means the days of anonymity in crypto are numbered.
We've already seen some businesses shut down, while others are looking to move elsewhere or figure out how to cope with the new rules. And it’s important to note that it's not just about KYC becoming a must the costs for verifying and registering businesses wanting to operate in the crypto space are going up too.
Long-term, I reckon these changes could be positive for the industry, but in the short run, the EU is likely gonna become a less appealing spot for crypto firms.
The increased compliance costs = increased barriers to entry for businesses. Lots of smaller services are shutting down (or will shut down), and fewer will come online from now on. This is great for huge companies like Coinbase, who can afford the increased compliance costs. They welcome burdensome regulation because it creates a less competitive market. That means increased market share for them.
All in all, it's terrible for the industry. What positive long term effects do you see resulting from this? I don't see any.
It's not entirely a bad thing. Because this is the first time, a definition of cryptocurrency is given in the AMLD directive and it says,
Reference: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32018L0843 (The English version of the document is available here)
So this is essentially a good thing for the crypto market in the long run for those who want to use cryptos within the legal limits and don't want to indulge into illegal transactions! At least crypto is being recognized in legal documents which can pave the way into better legal framework!
What can be positive in the long run is the fact that it will no longer be easy to start a business related to cryptocurrency without knowing exactly who is behind everything, which would mean less opportunity for scam people and run with the money. While some will not agree that increasing government interference is good for crypto, I do not see Bitcoin as something that can move forward without adapting to existing and new regulations.
I do not know if you read the article, but regarding your question :
In addition to what I've already written, I think it makes sense - but at the same time, it causes some discomfort to all existing businesses and puts all users under some pressure, because most still wonder what the new directive actually means to all of us.
Where are all the persons praising Europe as the crypto heaven when Binance moved to Malta, followed by Bittrex.
All the Fintech companies (cryptos related or not) seem far less receptive to anti-money laundering issues. They started to wake up only recently.
We weren't surprised to see businesses related to cryptos included in this directive, let's be honest it was a matter of time before it happens.
The good thing is, in the long run, we will see the Darwin theory effect. Actually, in Europe, there are countries where you can create a company without knowing where the country is on a map.
The previous AMLD was from 2014-2015 when cryptocurrency wasn't a thing. At this time they targeted all the "electronic money" means especially the prepaid cards etc. The $250 limit per prepaid card before the KYC was invented by AMLD4
I'm a big believer in free markets and principles like caveat emptor. Common sense always told me to stay away from anonymous, fly-by-night companies. To me, you're just rationalizing nanny state regulation. There is nothing "positive" about it.
Regardless of AMLD5, fools will continue getting scammed -- that's what fools do. Meanwhile, we the consumers will suffer from an uncompetitive market devoid of small businesses, plus higher fees as established services pass on these increased compliance costs to their customers.
Malta was branded as such precisely because of its regulatory framework, not the lack thereof:
I imagine the AMLD5 won't change much for larger firms, but I suppose that would depend largely on the added costs. If Malta is already actively implementing these AML regulations though, it's possible that exchanges might not have to adjust much.
Well, beyond protecting the public, the article did mention that financial institutions could play nicer with crypto once it all goes down. Whether or not that's a positive thing probably depends on the individual though lol.
Almost every time an exchange gets hacked or 'hacked', finding out who's running the business is not a concern. AMLD5 will do nothing to prevent scams from occurring, what it will lead to is higher regulatory barriers of entry, meaning lower competition, higher fees, lower limits, and a lower quality of service.
The voice of reason has arrived.
I understand that burdensome regulation is inevitable, but this tendency people have to paint it as fundamentally good really bothers me. It's very Stockholm syndrome-esque.