Projecting ‘Orange Pill’ on Banks as EU Pushes Crypto Regulation
“The signal goes on, and he shows up. That’s the way it’s been. That’s the way it’s going to be.” Whenever Gotham faces an existential threat, the Bat-Signal lights up the night sky.In the DC Comics universe, Batman always shows up to save the day when called upon.
Bitcoiners in Germany used a similar tactic this week, emblazoning the prominent cryptocurrency’s logo with a message to “study Bitcoin” on the side of the European Central Bank building in Frankfurt. The images were widely shared across social media, with notable Bitcoin (BTC) supporters and various company profiles paying tribute to the display.
A dose of the well-known “Orange Pill” is particularly relevant given that the global banking sector has been in the spotlight following the collapse of major institutions such as Silicon Valley Bank and Signature Bank in the US
Meanwhile, European parliamentarians passed a new draft bill focusing on anti-money laundering and combating the financing of terrorism, which sets out potential new rules enforcing KYC requirements for traditional financial and crypto-related services.
In addition, parliamentarians seek to limit cash and cryptocurrency payments for goods and services where customers cannot be identified. Under the draft law, the rules limit cash payments to up to €7,000 for cryptocurrency transactions – or €1,000 if the user’s identity is unknown.
Related: Silicon Valley Bank’s Fall Has Many Causes, But Crypto Is Not One
These proposed new rules are separate from the European Parliament’s upcoming Markets in Crypto-Assets (MiCA) bill that will enter into force in 2024, a proposed set of rules and guidelines aimed at regulating the cryptocurrency market in Europe.
Liam Murphy, managing director of EMEA at Wachsman, tells Cointelegraph that the AML-CFT bill passed on March 28 is focused on approving stricter rules to close gaps in combating money laundering, terrorist financing and sanctions evasion in the EU.
“There is a separate policy track for MiCA, although, as with many policy actions, there is some crossover. It should be noted that this was just one more step in the regulatory process, and the bill is far from being passed yet.”
Murphy added that he was also looking for more clarity on whether cryptocurrency transaction limits only apply to commercial transactions and not transfers between individuals.
Given that Wachsman serves a number of cryptocurrency service providers as a communications firm, Murphy noted that industry participants are becoming more aware that the sector could use regulation to meet its full potential.
“Innovation is unpredictable by its nature. We are experiencing a digital revolution and there is a real danger of both overregulation and underregulation.”
Erwin Voloder, senior policy fellow at the European Blockchain Association, also spoke to Cointelegraph about the European Parliament’s draft bill’s implications for cryptocurrency payments.
He highlighted that greater clarity on AML/CTF regulations is welcome, but argued that a double standard is constantly being applied to crypto payments.
Voloder said MEPs had previously backed down on the need to go through a CASP for the KYC process under Article 59a on the grounds that they were unnecessarily burdensome, according to industry feedback:
“The restrictions on crypto transactions make crypto transactions 7 times as risky as cash transactions from an AML/CTF perspective, which when compared to available data on global money laundering does not match.”
Also difficult to gauge is how cryptocurrency services such as Decentralized Finance (DeFi) protocols and even decentralized autonomous organizations will be governed by potential new laws.
“MiCA left ‘fully decentralized finance’ out of scope because it is often difficult to determine a chain of responsibility.”
Voloder used an example considering that a DeFi platform may have a “customer-facing” interface, but the actual economic activity takes place within the smart contract, which “is abstracted and independent of the interface layer”.
This suggests that a strategy is forming in the margins of the industry that could bring accountability and default reporting obligations to the DeFi space, including NFTs.
The AML-focused legislation brings crypto under its purview to tighten commercial transactions across Europe. Meanwhile, the cryptocurrency space is putting a broad spotlight on the recent failures of the traditional banking sector. What remains to be answered is which industry needs more oversight at this point.
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