AMLD5 Goes Into Effect January 2020, How Will It Affect Virtual Currency Space?

    2019/12/18 20:25 Maxwell huang Created with Sketch.

The EU’s 5th anti-money laundering directive (5AMLD) which entered into force in 2018, will take practical effect by January 10th 2020. Since then member states are obliged to make new policies law which must be compatible with 5AMLD. 

5AMLD extends the scope of Directive (EU) 2015/849 so as to include providers engaged in exchange services between virtual currencies and fiat currencies as well as custodian wallet providers. 

This means that exchanges or custodian wallet providers will have to register and let authorities obtain KYC of users.

According to the articles of 5AMLD, the definition of virtual currency is wide. “virtual currencies” means a digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency and does not possess a legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored and traded  electronically.

And “custodian wallet provider” means an entity that provides services to safeguard private cryptographic keys on behalf of its customers, to hold, store and transfer virtual currencies. 

The new EU law says that “The objective of this Directive is to cover all the potential uses of virtual currencies.”

Because of the KYC/AML regulation requirements under the new Directive, there are a lot of virtual currency startups which announced that they will shut down in 2020.

For example, crypto payments provider Bottle Pay, mining pool Simplecoin and interactive bitcoin faucet Chopcoin are shutting down in light of AMLD5. Bottle Pay has shut down only three months after raising a $2M seed round.

They all may be considered a “custodial wallet provider”.

5AMLD will also affect cryptocurrency exchanges. As we know, Binance and OKEx are both registered in Malta, which is EU member state. This means that they will be required to follow these rules or leave or geo-block the EU.

Fortunately there are DEXs which don’t provide custodian wallet. It’s possible that DEXs will explode since 5AMLD take effect.

    Adapted from: Executive editor: Maxwell
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