Regulation
Bitcoin and privacy threatened by new European regulations
The representation of Bitcoin is seen with the European Union flag in the background in this illustration… [+] photo taken in Poland on November 29, 2020. Photo illustration by Jakub Porzycki/NurPhoto
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The European Parliament recently adopted the revised anti-money laundering regulation, despite significant public opposition and humanitarian groups. The Coalition for Real Changealso known as BTC
Bitcoin
Coalition, urged members of Parliament to reject the proposals due to concerns about violations of financial freedoms and privacy. However, their efforts were in vain and a Majority vote adopted the proposals.
During informal discussions, the European Commission, Parliament and Council ignored public comments on the proposed changes. This action was seen as a diminution of the role of European Parliamentthe only directly elected EU body, and has raised concerns about the risk of increased misuse of financial data by authoritarian regimes.
Implications and key questions
The new regulation could influence financial rules around the world, affecting personal financial freedoms not only within the EU, but globally. It characterizes confidential payment tools and crowdfunding platforms as high risks, likely to restrict financial operations under the pretext of preventing money laundering and terrorist financing.
Crowdfunding: The AMLR classifies all crowdfunding platforms as high risk, which could increase operational costs, reduce the donor base and hinder vital efforts for activists and humanitarian actors. NGO during crises.
Financial exclusion: The new rules remove protections that helped include more people in the financial system and avoided unfair restrictions, affecting immigrants, dual citizens and other often vulnerable people. This deprives them of necessary financial protections and potentially increases discrimination within the financial system.
Privacy Payment Instruments: Characterizing private digital wallets or self-hosted wallets as risky ignores their role in promoting financial access and supporting humanitarian efforts, which could hinder NGOs’ ability to securely transfer funds to affected areas. to oppressive regimes.
AMLR extends beyond EU borders. The regulation sets a global precedent for financial regulation, which could impact third country. The proposal aims confidential payment and crowdfunding tools as self-hosted wallets and blenders, also labeling them as high risk.
Following the adoption of the LAMR, attention was focused on the activities of Austrian Raiffeisen Bank International in Russia. MPs raised concerns over the bank’s plans to continue and expand its operations by hiring more than 2,000 new employees, highlighting a critical gap in the enforcement of sanctions and AML regulations. As AMLR targets technologies such as Bitcoin wallets and mixers, large financial institutions continue operations that may contravene sanctions or facilitate money laundering.
Seth Hertlein, global head of policy at Ledger, expresses concerns about possible overreach. In a recent LinkedIn Comment, Hertlein criticized the removal of Section 41(a) because it suggests a shift toward surveillance of individuals rather than protection of their financial freedom. He said: “The removal of Article 41(a) is truly shameful and clearly shows where Member States’ priorities lie. There is no problem in reducing the risks a little, as long as their surveillance apparatus stays in place.”
Regulatory Support
Promoters argue that the Anti-Money Laundering Regulation strengthens the EU’s defenses against complex global threats such as money laundering and terrorist financing. The AMLR closes loopholes exploited by criminals by regulating digital wallets and mixers.
Proponents view AMLR as a crucial tool to combat widespread financial crime. They see the regulation as a necessary step to safeguard the economic stability of the EU and beyond. Circle’s Patrick Hansen commented on the recent approval of the package by the European Parliament.
Future results and global influence
Acceptance of AMLR likely to have global influence financial regulationwhich could lead to an increase regulatory burdens that disproportionately affect small entities and nonprofits, stifling innovation and civic engagement. Human rights and humanitarian groups fear the regulations could signal a shift toward more restrictive financial environments and invasions of privacy globally.
Given the importance of financial security and freedomsa more balanced approach to financial regulation is needed to protect fundamental rights and support a inclusive financial ecosystem that supports social and humanitarian initiatives.
Lyudmyla Kozlovska, president of the Open Dialogue Foundation and coordinator of the BTC Coalition, presents the findings of seven reports published by the Open Dialogue Foundation over the past two years. These reports reveal how banks in third countries, such as Kazakhstan and Turkey, are used to launder money or evade sanctions from authoritarian regimes. “Dictators don’t need Bitcoin wallets or mixers; they prefer established banks, especially Western ones, operating in regions like Russia, which has recently contributed 800 million euros in taxes for the Kremlin“, says Kozlovska.
The case of ING Bank, one of the leading European banks operating in Russia, illustrates the problem of inconsistent application of financial regulations. Although ING has been highlighted among other EU banks for its operations in Russia, it has maintained services that raise concerns over AML and CFT compliance, particularly given geopolitical tensions and sanctions. economic.
It also demonstrates the broader problem of inconsistent application of financial regulation. The bank discontinued its services with the Open Dialogue Foundation during a politically motivated campaign against the foundation under the guise of complying with anti-money laundering and counter-terrorist financing laws, influenced by the coordinated targeting of the Polish Law and Justice party, the Plahotniuc and Nazarbayev regimes.
And after?
The scale of illicit activities involving traditional fiat currencies globally must also be considered for context. According to The United Nations, between $800 and $2 trillion is laundered each year, which represents approximately 2 to 5% of global GDP. This figure demonstrates the challenges of combatting financial crime within traditional banking systems, where most money laundering still occurs. Lawmakers must balance combating these crimes with the need to protect fundamental financial freedoms and promote financial inclusion.
With the AMLR set to influence global financial regulatory standards, its acceptance marks an important moment for the future of financial regulation, both within the EU and internationally. Members of the Parliamentary Assembly of the Council of Europe call for urgent reforms to ensure that the regulation does not inadvertently harm those it aims to protect.
To mitigate these consequences, Lyudmyla Kozlovska calls on privacy advocates to engage with future MEPs on their policy proposals. “We must educate EU policymakers on the social necessity of bitcoin payments and crowdfunding mechanisms and prevent the misuse of anti-money laundering and counter-terrorism financing laws,” insists Kozlovsky.
The acceptance of the anti-money laundering regulation marks an important moment in the EU’s efforts to combat financial crime. However, while the regulation sets new precedents, it also raises concerns about possible overreach and its impact on privacy and financial freedom. This balance between security and freedom remains a crucial challenge, as stakeholders from all walks of life call for a nuanced approach that supports both effective law enforcement and basic human rights.