European Commission Proposal May End Bitcoin Anonymity

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Bitcoin mobile walletThe European Commission has published the first draft of a piece of a legislation to prevent the use of cryptocurrencies such as bitcoins in terrorism and criminal activities.

The draft proposes the establishment of a main database of details of those who use cryptocurrencies such as Bitcoin, including their wallet addresses and identities. The database can then be easily accessed by law enforcement and financial officials of European Union (EU) member states.

More about the Draft

The European Commission proposes laws, implements decisions, upholds treaties, and manages the daily affairs of the European Union. It has published the above-mentioned draft in a bid to reform existing anti money laundering policies.

The proposal says: “This proposal seeks to prevent the large-scale concealment of funds that can hinder the effective fight against financial crime and to ensure enhanced corporate transparency so that true beneficial owners of companies or other legal arrangements cannot hide behind undisclosed identities.”

According to the proposal, “unfettered access to information is essential to ensure that flows of money can be properly traced and illicit networks and flows detected at an early stage.”

Not Real Money

The draft, which could be made law in January 2017, does not actually recognize cryptocurrencies as real money. But it has the power to oblige digital currency wallet providers to comply with existing Know Your Customer (KYC) laws.

The proposal points that companies that provide exchange services between fiat currencies and virtual currencies as well as wallet service providers for cryptocurrencies are currently not obliged to check suspicious activities. Enabling competent authorities to monitor virtual currency use would provide a proportional and balanced approach, which would serve to safeguard the technical advances and the high transparency level achieved in social entrepreneurship and alternative finance.

Loss of Anonymity

The proposal, if passed into law, will make it mandatory for users of cryptocurrencies such as Bitcoin in all the 25 EU member states, including Finland, Italy, France, and Germany, to register their details. However, customers will be asked to voluntarily reveal their details “as a sign of good faith.”

Member states will be required to establish automated centralized mechanisms enabling the swift identification of payment and bank accounts. Member states can establish central registries with all the required data enabling the quick identification of account holders and give their authorities complete access to this information. They can also set up central data retrieval mechanisms that would meet a similar purpose.

Proposal Aims to Discourage Crime

Currently, cryptocurrencies are untraceable, making them very popular among honest online gamblers who want to wager at real money bitcoin casinos in peaceful anonymity. Unfortunately, they have also attracted the attention of cyber criminals who gleefully use them to finance illegal activities.

Since banks and financial institutions refuse to accept cryptocurrencies as “real money,” it is very difficult for governments to incorporate them into existing laws. The need of the hour is to create new and better laws, which is exactly what the European Commission is doing. Votes will be cast on the proposal by the end of this year.

July 30, 2016: • No Comments

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