The EU and crypto: Upcoming AML body proposed as crypto overseer, parliament wants to ban PoW assets

• The European Commission is proposing that an upcoming AML body take charge of overseeing illegal crypto transactions.
• Elsewhere, the European Parliament has proposed a ban on Bitcoin and other PoW crypto-assets and related services by 2025.

Authorities in the European Union (EU), including the European Commission, want an upcoming regulator to potentially oversee illicit crypto transactions. The regulator – the European Commission’s Anti-Money Laundering (AML) Authority – was first proposed in July 2021. The group is expected to initiate operations in  2024 and be “fully functional” by 2026.

According to a Tuesday Bloomberg report, several member states support placing crypto firms under the authority of the financial watchdog. The lead is Germany, with others being The Netherlands, Spain, Austria, Italy, and Luxembourg.

One unnamed diplomat says the move would improve distinct coverage of crypto transactions under EU financial regulations. The official would like the AML group to focus on high-risk cross-border transactions facilitated by crypto firms, banks, and other financial institutions. Supporting this view is member of European Parliament Luis Garicano who said:

It is key that the scope of the new EU authority explicitly includes crypto-assets, given that this is one of the fields more prone to money laundering activities.

EU fight against crypto facilitated money laundering

At present, other EU member states have yet to discuss the proposed framework. If approved, the AML body would be one of the first of its kind surveilling money laundering across an extensive area in Europe.

Money laundering through crypto-assets has increasingly become a point of concern among regulators worldwide. A January Chainalysis report shows that cryptocurrency worth a whopping $8.6 billion was laundered in 2021. This figure represents a 25 percent surge year-over-year.

For this reason, the US is forming a “specialized team dedicated to cryptocurrency” known as the Virtual Asset Exploitation Unit. According to Deputy Attorney General Lisa Monaco, the FBI-based unit would be tasked with tracking and seizing illicitly used funds. The US has also launched the National Cryptocurrency Enforcement Team (NCET) to investigate crypto-related crimes.

Other than the aforementioned plan, the European Commission also submitted another proposal last year aimed at combating crypto-enabled money laundering activities. 

Banning Bitcoin and anything PoW-related

However, what would have dire consequences is the recent proposal by the European Parliament to ban proof-of-work (PoW) based cryptocurrencies like Bitcoin from the EU. Additional requirements of the proposal are that EU businesses cease offering any PoW-related assets and services as of 2025.

Twitter user Patrick Hansen calls the move a “ hard-to-digest suicidal proposition,” saying it would “kill the entire European crypto industry.” In a thread of tweets, he notes that the EU would have a competitive edge in crypto in terms of Web3-enabled sovereignty, financial independence, and economic revival:

The EU economy is struggling in the web era. Our share in global equity markets has halved over the past 20 years.

 Web3 is THE opportunity we have long been waiting for.

The bill is now pending approval by the European Council and the European Commission.