Here’s When Europe’s New Bitcoin Rules Will Come Into Effect
There’s been a flurry of reports in the last day about the U.K. cracking down on bitcoin, with some claiming that the news was responsible for a “tumble” in the famously volatile cryptocurrency’s value—the value of one bitcoin was nearing $12,000 but is now down to around $11,350.
So what’s actually happened that’s new? The answer is: not a lot. But that doesn’t mean there aren’t changes coming.
The British government actually announced more than two-and-a-half years ago that it intended to extend anti-money laundering (AML) rules to cover cryptocurrency exchanges—a move that is apparently surprising and worrying some people now, but that was at the time described as a legitimizing “stamp of approval” for bitcoin.
But the really big change is the amendment of the European Union’s rules on “the prevention of the use of the financial system for the purposes of money laundering or terrorist financing.” The European Commission proposed this in July last year and (as is the way with the EU) the amendment is slowly crawling through the legislative process.
The “news” is that the media suddenly picked up on an answer given in the British Parliament a full month ago, in which Treasury economic secretary Stephen Barclay said the U.K. government is negotiating the amendment (as are all governments of EU member states) and the Treasury expects the negotiations to conclude in late 2017 or early 2018.
A Commission official told Fortune on Monday that the final “trilogue” negotiation on the amendment will take place next week (trilogues are the behind-closed-doors talks between member states and the European Parliament that essentially wrap up new legislation). “Everybody agrees” on this aspect of the amendment, the official said, so it will probably be officially recorded into EU law in a couple months’ time.
However, that does not mean—as some are reporting—that the changes will come into force next year. Instead, member states will have two years to transpose the new directive into their national laws, which means the “crackdown” probably won’t happen before 2020.
So what does the change actually entail? “It means that the banks and different operators which are defined in the AML rules will have to do due diligence to check where the money comes from and where it goes,” the Commission official said, adding that these players—such as exchange platforms and wallet providers—would have to perform “extra checks” if large quantities of virtual cash were making their way in and out of “shady countries.”
The U.S. has also cracked down on the use of bitcoin for money laundering, with the U.S. Treasury’s Financial Crimes Enforcement Network earlier this year fining the Russia-based BTC-e exchange $110 million for ignoring “know your customer” laws. China, too, is working on rules to force the use of real names and to stop bitcoin being used for money laundering.
Of course, many people like bitcoin precisely because it can be sent and received in an almost anonymous way (the transactions are recorded in a public ledger, after all, so a degree of tracking is possible).
But anyone who is hoping for bitcoin to have a long-term, upwards-trajectory future must be aware that this can only happen under a regulatory framework that largely mirrors the rules that apply to the rest of international finance. If people are freaking out about the latest news, they need to be aware that it’s neither new nor worth freaking out about.