EBA Opinion on proposals to bring virtual currencies into the scope of the 4AMLD
News    ·   16-08-2016

AUTHOR: Diane Bugeja

In July 2014, the European Banking Authority (“EBA”) published an Opinion on Virtual Currencies, within which it recommended that the risks presented by virtual currencies be mitigated by, inter alia, bringing these instruments within the scope of the EU AML/CFT Directive, which was being amended at the time; despite these proposals, the 4AMLD (Directive (EU) 2015/849) did not include a reference to virtual currencies. Yet, in the aftermath of the 2015 Paris terrorist attacks, and the role of virtual currencies therein, the EU Commission publish at Action Plan on 2 February 2016 proposing to re-open certain aspects of the 4AMLD, including introducing measures to address the anonymity associated with the purchase and use of virtual currencies. The Commission eventually published its proposals for amendments to the 4AMLD on 5 July 2016, recommending that custodian wallet providers and virtual currency exchange platforms be brought within the scope of the 4AMLD as obliged entities.

In light of these events, the EBA has now published a second Opinion on virtual currencies to specifically respond to the Commission’s proposals by putting forward seven proposals of its own. In summary, the EBA is proposing the following: 

  1. Since there is currently no AML/CFT regime for virtual currencies, Member States should be given sufficient time to transpose and implement the new amendments and hence the transposition deadline should be aligned to the currently applicable transposition deadline, i.e. 26 June 2017;
  2. The second Payment Services Directive (“PSD2”) is currently not suitable for mitigating all the risks arising from virtual currency transactions and, hence, transactions of this nature should for now remain outside of the scope of PSD2;
  3. The status of custodian wallet providers and virtual currency exchange platforms should be clarified to avoid any misconceptions and/or misrepresentations on the part of obliged entities and their business partners;
  4. The amendments should enable competent authorities to easily exchange information in relation to virtual currencies, particularly in light of the innovation and internationality which characterizes the business of virtual currencies;
  5. In the absence of a sectoral Directive being applicable to custodian wallet providers and virtual currency exchange platforms , the amendments should provide more detail on how competent authorities should carry out fit and proper tests of owners and controllers of these obliged entities so as to ensure consistency of approach across the EU;   
  6. The amendments should clarify the scope of the proposed licensing or registration regime for custodian wallet providers and virtual currency exchange platforms; and
  7. The proposed extension of national sanction powers to custodian wallet providers and virtual currency exchange platforms should be retained.

The EBA’s Opinion on the EU Commission’s proposal to bring Virtual Currencies into the scope of Directive (EU) 2015/849 can be read here.

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