Cryptocurrency in Europe is associated with money laundering among many EU governments. This is partly due to the fact that laws within the EU are collectively adopted by countries with different positions. However, the situation is slowly but changing.
Let’s analyze the legality of cryptocurrencies in Europe, which countries are friendly to them, and what future regulation might look like.
Is cryptocurrency legal in Europe?
If we talk about the legal status of Bitcoin in Europe – yes. You can buy Bitcoin and Ethereum on European crypto exchanges. However, it should be taken into account that in 2020 anti-money laundering measures were strengthened and aimed at the transparency of the cryptocurrency market. Bitcoin in Europe is still in an unsustainable position.
Why you need 5AMLD?
For consumers, the adoption of the EU Fifth Anti-Money Laundering Directive (5AMLD) means that they cannot anonymously buy digital assets, and for regulators, it is an opportunity to find out at last who is involved in cryptocurrency transactions.
According to the directive, companies are required to store information about how their customers use cryptocurrency. The measure is designed to stop the use of coins to finance terrorism or launder the proceeds of crime. Organizations whose activities are related to cryptocurrency must provide customer information to the relevant authorities.
For example, a crypto-exchange based in Spain must be officially registered with the regulator of that country. Bitcoin and the law are now inseparable here.
In Europe, the Forex industry is very popular. It should be said that when we are talking about the legal status of crypto it is one of the instruments for trading. Right now a long list of European Forex brokers are actively promoting the use of crypto.
Should regulators support cryptocurrencies more?
Officials disagree on this issue. The former head of the European Central Bank has repeatedly been skeptical about the value of bitcoin and its role as a means of payment. It becomes clear why the legality of bitcoin in Europe still remains an unresolved issue.
On the one hand, crypto-regulation is struggling to keep up with innovation in this area. On the other hand, in December 2019, the finance ministers of most EU countries agreed that no such project could be launched “until legal, regulatory and supervisory problems and risks are properly identified and considered”.
Their fears were based on the fact that it could create financial instability and undermine the position of the euro, not to mention the central banks.
Currently, the EU is actively working on the development of cryptocurrency regulation. At the same time, the ECB is considering the launch of its own digital currency Eurocoin, which can challenge the stablecoins of private companies. It seems that crypto-regulation makes business more bloodthirsty.
Bitcoin’s legal status by country
Many experts consider Germany one of the most far-sighted countries of the EU when it comes to the regulation of cryptocurrencies. Germany in 2013 led the official number of Bitcoin owners. This is encouraging, as Germany is the largest member of the trade bloc in terms of gross domestic product. The German Finance Ministry recognizes bitcoin as not only private money, but also as a financial instrument.
German banks are allowed to manage digital assets on behalf of customers. This can attract institutional capital to the industry
In France, it is much easier to make cryptocurrency payments in regular stores than in other European countries. Last year, at Retail Week in Paris, it was announced that cryptocurrencies would be officially accepted as a payment method at dozens of major retail stores, including sportswear giant Decathlon and perfume brand Sephora.
In Spain, the issue of “Bitcoin and law” is not relevant. The country is good at protecting both consumers and investors. Given the decentralized nature of cryptocurrencies, it is difficult for them to compete with other financial instruments. Do not expect that cryptocurrencies are recognized as a means of payment in the country in the near future: this status is still only in fiat currencies.
There is some confusion in the UK about who is responsible for what when it comes to digital assets. In general, crypto-regulation in the country is quite fragmented. The Financial Conduct Authority (FCA) has a role to play in enforcing anti-money laundering and preventing terrorist financing. But this is a role with limited powers, which came into force only in January 2020.
Most Britons can easily buy/sell bitcoin or another cryptocurrency. But in the current situation in the country, some experts are of the opinion that it is better to avoid such investments
The FCA is responsible for the business’s compliance with anti-money laundering and terrorist financing measures, but is not responsible for the crypto exchange’s relationship with customers and cannot assist users in protecting their funds.
Luxembourg became the first country in Europe to license cryptocurrency exchanges. The country has rules of the National Commission for the Supervision of the Financial Sector, which does not allow undocumented crypto companies to operate in the jurisdiction of the country.