Europe eyes AML & CTF controls for bitcoin


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Bitcoin-friendly businesses that were eyeing European locations as regulation-free environments for virtual currencies may need to reconsider as AML – CTF and related KYC (CDD) concerns are  at the fore there as well as  in the U.S.

On Friday, the European Banking Authority (EBA) published an opinion recommending both that banks avoid most bitcoin-friendly customers until regulations are in place and that the EU immediately seek to establish comprehensive regulations for virtual currencies.

Reuters reported on these concerns about how anonymous bitcoin transactions include the easy facilitation of money laundering and terrorist financing, the potential for fraud and other schemes, and the lack of direct monetary policy control.

The European Banking Authority noted over 70 risks related to unregulated virtual currencies, including those previously mentioned. The EBA opinion was addressed to the European Commission, the EU Council, the EU Parliament, and to regulatory authorities in individual EU countries.

According to the report, particularly risky elements of bitcoins and similar virtual currencies can include the anonymity factor for payers, payees, and those validating the transactions; the omnipresent potential for computer-driven currency schemes;  the inability to guarantee IT security; and the uncertain “viability of some market participants,” to name a few.

In the short term, the EBA opinion advises “national supervisory authorities to discourage credit institutions, payment institutions and e-money institutions from buying, holding, or selling virtual currencies. While this response will mitigate risks arising from the interaction between virtual currency schemes and regulated financial services, it will not address risks arising within, or between, virtual currencies schemes themselves.”

And for the long term, the opinion advises that the EU and member countries begin immediately to create the body of regulations that will support the use and growth of virtual currencies while protecting the integrity of banking relationships from money laundering, fraud, and terrorist financing.