Industry News The EU Draft Law that Aims to Monitor Users of Bitcoin

The EU Draft Law that Aims to Monitor Users of Bitcoin

March 14, 2017

EU ParlimentLate winter of 2017 is definitely an active time when it comes to bitcoin and the EU. In this period, the first PM of an EU country called upon the union to accept digital currency and its underlining blockchain tech, including its current forms like bitcoin. At the same time, the uncertainty that looms over the block related to the coming triggering of Article 50 by the UK makes the markets very volatile and the overall atmosphere one of nervous expectancy.

In the same environment, it is no surprise that the forward-thinking of people like the PM of Malta is followed by more reactionary measures that try to impose some restrictions to the digital currency domain in the EU. One of the recent initiatives comes in the form of a draft of a law that focuses on monitoring the users of BTC who live and work in the EU.

While this sounds like a certain step backward for all current and future participants of the digital currency ecosystem in the EU, the same does not necessarily have to be true. Here are the facts about this draft and what it might mean if or when it is passed in the EU nations.

The EU Parliament Draft Legislation

The core element of this story is a publication of the new legislation in a draft from that was produced by the members of the EU Parliament. In the same draft, some elements of regulation of digital currencies in the block have been presented. In the document published on 9th March, the writers of the law sought to empower entities in the EU nations which would act as watchdogs. The same entities would be able to collect and procure data on those EU citizens or residents who utilize some form of digital currencies.

More importantly, the same bill provides the platform that would allow the governments or the oversight bodies to create databases of digital currency users. Today, people in the EU, as well as those across the globe utilize BTC to bet online, purchase things, ensure their capital and do many more versatile things. With these databases, the individual wallet addresses would be directly linked to real-life identities.

This kind of a move goes directly against the very essence of bitcoin but other blockchain-based currencies. With a database like this one, the idea of privacy protection as it is known today would be completely deconstructed.

Should Digital Currencies be Anonymous?

In short and according to the members of the EU parliament, the digital currency owners should not enjoy the protection of anonymity. In fact, the very wording of the document includes a segment where it states, exceedingly clearly, that holders of virtual currency, as the draft puts it, should not be anonymous.

In the case that the same legislation is approved, it would also allow for the making of gatherers of financial intelligence that would function on a national level. The same information would then be shared with similar structures in other countries.

The draft was prepared by the Parliament Committee on Economic and Monetary Affairs of the European Union, but also the Committee on Civil Liberties, Justice and Home Affairs, which is ironic, considering the main objective of the bill.

That is the reason why the draft states that these FIUs or Financial Intelligence Units should be able to associate the identity of the owners with the virtual currency addresses. The purpose of this is, according to the bill, the process of combating a range of risks that comes from using this type of system in full anonymity.

Voluntary Self-Declaration of Digital Currency Users

The bill also opens another possibility, which is one in which the actual users themselves come forward and make their presence known to the FIU working on their national level. While this was not defined clearly, the law does ask for more plans on the same subject matter. This voluntary mechanism for all manner of processes is something that is fast becoming more and more prominent, from things like crowdfunding and social media forums to eSports competitions.

But, the release of the draft comes after more than 12 months after the EU Commission proposed measures that would instate AML (anti-money laundering) controls on the space inhabited by digital currencies. Additionally, the same body, later on, took steps to create a special task force with the purpose of focusing on this aspect of FinTech.

The move was supported by the majority of committee members, which shows that the issue bumped into no political hurdles. The same can be expected from this draft as well, but so far there are no indications when the draft might become a part of the EU laws.

Safety at the Price of Growth

The essence of this law set by the EU Parliament members shows that for the most lawmakers, the idea of digital currency still represents something that is predominantly negative. Practically in the same month when the head of EU state asked the block to embrace the digital currency potential for growth and development, this event that can only be described as backlash happened.

There is little doubt that the EU politicians are determined to make sure that their constituency is protected in the newly created space of digital currencies. But, the notion of threatening anonymity first by the states and then by legal association, the entire EU, shows that the global mindset remains deeply embedded in the 20th century.

Will the same process elevate the status of AML measures? It will, but only because the metric for this remains something reflected in the old ways of protection inside of the traditional financial systems. Out-of-state entities which would desire to threaten the EU end-users of digital currency will still be able to act and the databases of users would only hamper the citizens of the EU, no one else.

There is still time for the draft of this bill to be changed and aligned with the more progressive viewpoints in the EU. But, if this does not happen, the near future of digital currency development will be impacted for the entire European Union.

Source: CoinDesk