PayTechTalk #53 - AMLD5 as a start for crypto regulation

PayTechTalk - the Podcast of PAYMENT.TECHNOLOGY.LAW. | PayTechLaw

In today’s episode of PayTechTalk, I’ll be talking to my colleagues Charles Krier from Annerton Luxembourg and Alireza Siadat from Annerton Frankfurt. Together we will be analysing from both a Luxembourg and a German perspective the impact of the fifth anti-money laundering directive (AMLD5) on EU crypto regulation. Our talk will mainly focus on the following topics: Why has the European lawmaker chosen the AMLD5 for introducing crypto regulation and how? The work at EU level on a standalone piece of legislation on virtual assets is still ongoing. The aim is to include virtual currency participants in the scope of the AMLD5 in order to impose on them customer due diligence measures like the identification of cryptocurrency users. Indeed, the anonymity of virtual currencies allows potential misuse for criminal purposes. Different implementation of the crypto related AMLD5 provisions in Germany and Luxembourg Historically, both countries have tried in different ways to regulate the cryptocurrency business before the AMLD5 was in place. With the implementation of the AMLD5, Germany introduced two proper licenses for crypto asset trading as well as for the custody of crypto assets. These two new licence regimes are unique within the EU. Indeed, Luxembourg has not implemented a new licence regime but asks the virtual asset service providers to apply for registration. Could the German model be a role model for Europe? Potentially yes and relying on the MiFID framework would make sense. But the important part will be a harmonized EU solution allowing virtual asset services providers to passport their activities at EU level and allowing the EU to position itself with an attractive solution in the international competitive race. What should a harmonized EU regulation for new technologies such as virtual assets look like? Numerous aspects such as international competitiveness, the treatment of different categories of virtual assets, advantages of the use of virtual assets when it comes to investor and consumer protections and the assessment of applying and amending existing legislation vs. creating new legislation should be considered in view of a harmonized EU regulation. Moreover, it will be interesting to discuss the advantages and disadvantages of the legal acts at European level that would fit best for setting the harmonized framework, i.e. the regulation and the directive. Next targets for European lawmakers to put under regulation The blockchain economy has led to many interesting services such as digital identity services. In addition, there is legal uncertainty when it comes to the qualification of stablecoins. With the example of central bank digital currencies (CDBC’s), the newest category of cryptocurrencies, it is worth looking at the potential future role of Central Banks in issuing or supporting cryptocurrencies and including them in their monetary policy. Wishing you an interesting and informative hour. Enjoy PayTechTalk 53! Further information and related links: • https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12089-Directive-regulation-establishing-a-European-framework-for-markets-in-crypto-assets/public-consultation • https://ec.europa.eu/digital-single-market/en/news/launch-international-association-trusted-blockchain-applications-inatba