EU Proposes Strict KYC for Crypto Transactions Under €1,000 to Combat Small-Scale Terror Funding
The Rise of Crypto in Terror Financing
Following the recent terror attack by Hamas in early October against Israel, cryptocurrencies have come under scrutiny again. Legislators, including those from the United States, believe that cryptocurrencies are facilitating fundraising activities for terrorist organizations.
EU Legislators Target Low-Value Crypto Transactions
In response to these concerns, European legislators, as part of their Anti-Money Laundering legislative preparations, are now proposing a regulation that would require cryptocurrency companies to carry out identity checks and verifications for crypto transactions under €1,000. This comes after an established regulation that mandates identity verification for transactions exceeding €1,000, focusing on understanding the relationship between transacting parties.
Concerns Over Small Transactions Funding Terrorism
During a closed-door meeting on Tuesday, EU officials expressed fears that “acts of financing terrorism could also be small-scale and not just large-scale,” leading to plans for stringent scrutiny of transactions under €1,000. However, officials have not yet reached an agreement on this plan. Even if an agreement is reached, it must be approved by the full council of members and undergo scrutiny in the Council of the EU before becoming law. Carême, the Parliament’s negotiator for the Anti-Money Laundering Directive, commented on the need for more relevant information to advance this measure.
Experts Warn Against Stifling Innovation
Kristin Smith, the executive director of a U.S.-based blockchain association, opposes the proposed EU legislation. She warns that exaggerating the role of cryptocurrencies in criminal activities could significantly stifle innovation:
“It’s clear that many assumptions about the role of digital assets in global financial transfers are not in line with reality.”
(Further reading: Crypto Shouldn’t Be Blamed for Terror Funding: US Lawmakers Urge Biden to Review Traditional Currency Misuse)
Chainalysis Report Shows Minimal Illegal Crypto Usage
A report by research institution Chainalysis titled “The Chainalysis 2023 Crypto Crime Report” reveals that, as of 2022, illegal activities involving cryptocurrencies account for only 0.24% of the total volume of digital assets.
Conclusion:
The proposed EU legislation to enforce stringent KYC measures on crypto transactions under €1,000 reflects a growing concern over the use of digital currencies in small-scale terror financing. However, experts caution against overestimating the role of cryptocurrencies in criminal activities, emphasizing the need for balanced regulations that do not hinder technological innovation.
Keywords: Cryptocurrency, EU Legislation, KYC, Anti-Money Laundering, Terror Financing, Hamas, Digital Assets, Blockchain, Chainalysis, Financial Regulations, EU Council, Kristin Smith, Paolo Ardoino, Crypto Transactions, Financial Crime
