Bank Regulator Calls for Broader Oversight of EU Bitcoin Services

The European Banking Authority is calling for greater regulatory oversight for bitcoin exchanges and custodial wallets.

AccessTimeIconAug 12, 2016 at 6:31 p.m. UTC
Updated Sep 11, 2021 at 12:26 p.m. UTC

The European Banking Authority (EBA) has called for more details regarding the European Union's (EU) plan to impose tighter anti-money laundering (AML) controls on digital currency exchanges and custodial wallet services.

The regulator, which oversees banking activity in the EU, offered comment yesterday on a prior proposal from the executive branch of the EU to bring exchange and wallet services under the Anti-Money Laundering Directive. Proponents say the move would end the perceived anonymity of purchases and transactions conducted using the technology.

Still, critics have attacked the proposal by the European Commission as too onerous or redundant, as it would ultimately fall on services already subject to national regulation. The European Commission has been publicly exploring options since earlier this year.

In comments, the EBA largely welcomed the European Commission's recommendations, but said that overall the proposal falls short, and that provisions focused on data collection should be strengthened.

The organization said:

"...the Commission and co-legislators should ensure that competent authorities have the appropriate tools at their disposal to ensure the effective supervision of [custodial wallet providers] (CWPs) and [virtual currency exchange providers] (VCEPs) compliance with their AML/CFT obligations."

Licensing vs registration

The EBA also suggested that the European Commission should provide greater clarity on whether digital currency services ought to be supervised under a broader European Union licensure or registration scheme.

The group said that this distinction should be drawn as EU member states are likely to "adopt very different regimes".

In the EBA's view, this would lead to a more complicated regulatory environment.

"The EBA therefore considers that the EU Commission and co-legislators should take a decision whether either a licensing or a registration regime is most suitable and conducive to the aim of deterring terrorist financing across the EU or, should this not be achievable, at least provide clarity about the features that a national registration or authorisation regime should have," the group said.

Sanction powers pushed

Notably, the EBA said that it believes that regulators in European nations should retain the ability to impose sanctions on non-compliant exchange and wallet services that handle digital currencies.

According to the text of the directive, these sanctions may include financial penalties, public admonishments, bans on particular business employees or the rescinding of any nation-level licensure a company may have received.

"In order to ensure that VCEPs and CWPs comply with the requirements, national authorities should have at their disposal effective, proportionate and dissuasive sanctions for failure of these new type of entities to respect key requirement of the directive, including the reporting of suspicious transactions," the group said.

The EBA also raised doubt about when the measures would be formally adopted, calling on the European Commission to extend a January 2017 deadline for their approval to next year.

This, the EBA said, would give member states more time to absorb the changes and adopt the policies in question.

Correction: An earlier version of this article incorrectly stated that the EBA was an association of banks, which is incorrect. The EBA is an EU-level banking regulator headquartered in the UK. This article and headline have been updated to reflect this.

EU flag image via Shutterstock


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