Crypto & Anti-Money Laundering (AML)

The EU directive 2018/843 of 30 May 2018, published in the Official Journal of the European Union on 19 June 2018, modifies the European directive 2015/849 pertaining to preventing the use of the financial system for purposes of money-laundering or terrorist financing. One of the main changes is to subject to obligations certain intermediaries in crypto-assets investment. Its provisions will come into force only once they have been transposed into national law, which each Member State must carry out at the latest by 10 January 2020.

The directive of 30 May 2018 extends the scope of EU obligations pertaining to combating money-laundering and the financing of terrorism to (i) providers of exchange services between virtual currencies and fiat currencies, and to (ii) custodian wallet providers.

• With a view to combating money-laundering and the financing of terrorism, the reform aims to enable the competent authorities to monitor, via these actors, use of these virtual currencies.
   
• The reform aims to strengthen measures in this regard, considering that “anonymity of virtual currencies allows their potential misuse for criminal purposes”. However, it wishes to define “a balanced and proportional approach, safeguarding technical advances and the high degree of transparency attained in the field of alternative finance and social entrepreneurship”.

The concept of virtual currency is broad. It covers all digital representations of a value that are not issued or guaranteed by a central bank or a public authority, that are not necessarily attached to a legally established fiat currency, and that do not possess a legal status of currency or money, but that are accepted by natural or legal persons as a means of exchange that can be transferred, stored and traded electronically.

• Providers engaged in exchange services between virtual currencies and fiat currencies (that is to say coins and banknotes that are designated as legal tender and electronic money, of a country, accepted as a medium of exchange in the issuing country).
   
• Custodian wallet providers are entities that provide services to safeguard private cryptographic keys on behalf of its customers, to hold, store and transfer virtual currencies.

The directive also provides that all national financial intelligence units (in France, TRACFIN) should be able to obtain information enabling them to associate virtual currency addresses to the identity of the owner of such virtual currency to combat the anonymity of virtual currency transactions and their potential misuse to finance criminal activities.

It also indicates that providers engaged in exchange services between virtual currencies and fiat currencies, as well as custodian wallet providers, should be registered.

The European Commission shall draft a report, to be published at the latest on 11 January 2022, on the implementation of this Directive. Where necessary, it shall contain appropriate legislative proposals, including, where appropriate, with respect to virtual currencies, empowerments to set up and maintain a central database registering users’ identities and wallet addresses accessible to financial intelligence units, as well as self-declaration forms for the use of virtual currency users.

This reform contributes to the definition, on a European level, of a regulatory framework for actors that are part of the crypto-assets investment sector.