Europe’s AML regulations come at a high cost — for your privacy and otherwise

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2 years ago

October 17, 2023

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The European Union’s financial regulatory landscape is in flux with the introduction of multiple Anti-Money Laundering (AML) directives and related laws. These regulations, although designed to protect the financial system, come at a hidden, and sometimes steep, cost to consumers and financial institutions alike. It’s imperative to understand their wider implications, and to question whether the costs — both monetary and ethical — are simply too high.

To name just a few, the AML Directive 5, MiCa and the Transfer of Funds Regulation have reshaped the European financial framework. These laws mandate a rigorous monitoring system. However, the depth and breadth of these regulations are unparalleled in their scope. One cannot help but wonder if such comprehensive oversight is truly sustainable in the long run Banks, crypto asset managers, and even sports clubs now face complex due diligence processes, requiring them to verify customer identities, assets, and transaction patterns. With the Financial Action Task Force (FATF) Travel Rule and equivalents of the Foreign Corrupt Practices Act in play, data collection, sharing, and monitoring become increasingly invasive. This begs the question: to what extent should the quest for security compromise the sanctity of personal data?

For many, this extensive scrutiny spells the end of financial privacy. While it’s undeniably crucial to deter criminal activities, these measures have begun encroaching upon personal freedoms. This isn’t just a minor inconvenience; it signifies a broader shift in the social contract of trust and transparency between citizens and institutions. Consider, for instance, the public accessibility mandate for beneficial owners of corporate entities. Suddenly, individuals and businesses lose control over their financial confidentiality, an unsettling consequence for a region that prides itself on individual rights and privacy. Such drastic changes necessitate a rigorous debate on the ethical implications involved.

The unforeseen costs of these regulations are burdensome. Financial institutions bear the brunt of technology upgrades, intensive man-hour investments and processes that have been revamped. This not only hampers their agility in a fast-evolving market but also deters potential new entrants from contributing to the financial ecosystem. Unfortunately, these overheads don’t vanish into thin air. They trickle down, affecting consumers in the form of higher fees and limited financial product offerings. In essence, the common man pays a tangible price for these regulatory shifts. Such economic ramifications must be weighed against the purported benefits of these regulations.

(1/2) At the annual @osce_odihr #WarsawHDC, our @KSzczypska highlighted to foreign diplomats and representatives of international institutions the #financialexclusion resulting from the abuse of Anti-Money Laundering & Counter Financing Terrorism (#AML/CFT) rules, which has… pic.twitter.com/l96HFHEtvR

— Open Dialogue Foundation / Fundacja Otwarty Dialog (@ODFoundation) October 12, 2023

What’s even more concerning is that despite these hefty regulations, monumental regulatory failures persist. Big names like HSBC, Danske Bank, and FTX have been associated with regulatory controversies. It’s distressing to observe that even with such stringent rules, large-scale oversights still occur. The juxtaposition of strict regulations with glaring lapses presents a paradox that warrants thorough introspection. It poses a daunting challenge: if these behemoths, with their vast resources, falter, what hope do smaller entities have in navigating this regulatory maze? This naturally leads to skepticism. Are these regulations genuinely effective, or are they mere symbolic gestures, inconveniencing businesses and consumers alike without ensuring the intended foolproof security?

Europe’s intentions are undoubtedly noble. In a world of increasing cyber threats and financial crimes, protective measures are essential. Yet, the path to safety shouldn’t undermine the values we hold dear. With every stride towards security, we must be cautious not to tread upon the tenets of personal liberty. But it’s equally crucial to ensure that these protective walls don’t become stifling cages. A fine balance must be struck between security and freedom, costs and benefits. As Europe pioneers this journey, it has the responsibility of crafting a model that other regions can emulate without reservations.

Europe’s evolving financial regulatory framework requires a closer examination. Not just from a legal or economic perspective, but from an ethical standpoint. The choices made today will shape the future of finance in the region, setting precedents that could reverberate globally. Personal privacy is a cherished right, and it’s imperative that it doesn’t become an inadvertent casualty in the quest for financial security. The ultimate challenge lies in harmonizing these conflicting demands, creating a landscape where safety doesn’t overshadow freedom. Only by achieving this equilibrium can Europe truly champion a regulatory model that stands the test of time.

George Basiladze is the co-founder and CEO of Wert, a fintech company dedicated to creating products that expand fiat payment access to crypto. He previously co-founded Cryptopay, a Bitcoin wallet. Before fintech, he held analyst roles at companies including NordWest Energy and Evli Bank PLC, accumulating years of experience in the financial and tech sectors. He graduated from the University of Exeter and the Higher School of Economics. Based in Estonia, he has consulted for firms navigating European AML regulations. (Disclaimer: George has direct involvement with fintech companies that could be influenced by European AML regulations.)

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Politics

Bitcoin Suisse eyes UAE expansion with regulatory nod in Abu Dhabi

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2 hours ago

May 21, 2025

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Bitcoin Suisse eyes UAE expansion with regulatory nod in Abu Dhabi

Bitcoin Suisse secured an in-principle approval (IPA) from the Financial Services Regulatory Authority (FSRA) of the Abu Dhabi Global Market (ADGM), marking a major step in the Swiss crypto firm’s expansion beyond the European Union.

The Swiss crypto financial service provider received the in-principle approval through its subsidiary BTCS (Middle East), according to a May 21 news release.

The IPA is a precursor to a full financial services license, which would allow Bitcoin Suisse to provide regulated crypto financial services such as digital asset trading, crypto securities and derivatives offerings, as well as custody solutions.

The approval reflects the firm’s “strong commitment to maintaining the highest standards of transparency, security, and regulatory compliance,” according to Ceyda Majcen, head of global expansion and designated senior executive officer of BTCS (Middle East).

“Abu Dhabi, one of the Middle East’s fastest-growing financial centers, presents a compelling opportunity for growth. We look forward to working closely with the FSRA to obtain our full license,” Majcen wrote in a May 21 X announcement.

This marks Bitcoin Suisse’s first expansion outside of the European Union.

Founded in 2013, Bitcoin Suisse played a significant role in developing the country’s crypto ecosystem and has been a key contributor to Switzerland’s Crypto Valley, a Switzerland-based blockchain ecosystem valued at more than $500 billion.

Crypto firms bet on Middle East as next global crypto hub

Increasingly more crypto firms are expanding into the Middle East, seeing the region as the next potential global crypto hub due to its business-friendly regulatory licensing environment.

On April 29, Circle, the issuer of the world’s second-largest stablecoin, USDC (USDC), received an in-principle approval from the FSRA, moving one step closer to the full license to become a regulated money service provider in the United Arab Emirates.

A day earlier, the Stacks Asia DLT Foundation partnered with ADGM, becoming the first Bitcoin-based organization to establish an official presence in the Middle East, Cointelegraph reported on April 28.

As part of the partnership, the Stacks Foundation aims to advance progressive regulatory frameworks in the Middle East.

“We’re not just focused locally — our team is engaged in global conversations, advocating for frameworks that balance decentralization, security, innovation, and compliance surrounding the unlocking of Bitcoin capital,” Kyle Ellicott, executive director at Stacks Asia DLT Foundation, told Cointelegraph.

The foundation is also developing the Bitcoin Capital Activation Framework, described as a comprehensive policy blueprint to help regulators enable Bitcoin utility in their jurisdictions.

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Politics

Crypto.com secures EU license to launch crypto financial derivatives

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3 hours ago

May 21, 2025

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Crypto.com secures EU license to launch crypto financial derivatives

Mobile-first crypto exchange and payment platform Crypto.com secured a license allowing it to offer cryptocurrency financial derivatives in the European Economic Area.

According to a May 21 announcement, Crypto.com secured a Markets in Financial Instruments Directive (MiFID) license.

“We have already expanded our brand presence in Europe since receiving our MiCA licence and we now look forward to providing customers across the region even more ways to engage with our platform through these new offerings,” said Crypto.com’s co-founder and CEO, Kris Marszalek.

The announcement followed Crypto.com receiving in-principle approval to operate across the European Union under a Markets in Crypto-Assets (MiCA) license in mid-January. The company received regulatory approval for its acquisition of Cyprus-based trading services firm A.N. Allnew Investments from the Cyprus Securities and Exchange Commission (CySEC).

Crypto.com did not immediately respond to Cointelegraph’s request for comment.

A popular strategy

The company is not the first crypto entity to obtain a MiFID license by acquiring a Cyprus-based financial firm. On May 20, cryptocurrency exchange Kraken announced the launch of regulated derivatives trading on its platform under the European Union’s Markets in Financial Instruments Directive (MiFID II).

Like Crypto.com, a Cyprus-based entity played a role in the strategy, with Kraken relying on MiFID II-regulated entity Payward Europe Digital Solutions to offer its derivatives. The launch followed Kraken completing its acquisition of the futures trading platform NinjaTrader earlier in May as its first-quarter revenue jumped 19% year-on-year to $471.7 million.

Crypto derivatives are all the rage

Recently, Coinbase CEO Brian Armstrong said his firm will continue to look for merger and acquisition opportunities, after acquiring crypto derivatives platform Deribit. The comments came after the publicly listed US crypto exchange earlier this month agreed to acquire Deribit, one of the world’s biggest crypto derivatives trading platforms.

Major crypto exchange Gemini has also recently received regulatory approval to expand crypto derivatives trading across Europe. Lastly, decentralized finance platform Synthetix will also venture further into crypto derivatives with plans to re-acquire the crypto options platform Derive.

Crypto.com has made its fair share of acquisitions. Those include Fintek Securities, Charterprime, Orion Principals and SEC-registered broker-dealer Watchdog Capital.

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Politics

SEC’s Peirce says NFT royalties do not make tokens securities

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4 hours ago

May 21, 2025

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SEC’s Peirce says NFT royalties do not make tokens securities

United States Securities and Exchange Commission (SEC) Commissioner Hester Peirce said many non-fungible tokens (NFTs), including those with mechanisms to pay creator royalties, likely fall outside the purview of federal securities laws.

In a recent speech, Peirce said NFTs that allow artists to earn resale revenue do not automatically qualify as securities. Unlike stocks, NFTs are programmable assets that distribute proceeds to developers or artists. The SEC official said that mirrors how streaming platforms compensate musicians and filmmakers.

“Just as streaming platforms pay royalties to the creator of a song or video each time a user plays it, an NFT can enable artists to benefit from the appreciation in the value of their work after its initial sale,” Peirce said.

Peirce added that the feature does not provide NFT owners any rights or interest in any business enterprise or profits “traditionally associated with securities.”

SEC never prohibited NFT royalties

Oscar Franklin Tan, chief legal officer of Enjin core contributor Atlas Development Services, told Cointelegraph that the recent remarks by Peirce on NFTs and creator royalties have been widely misunderstood.

Peirce had clarified that NFTs that send resale royalties to artists are not necessarily securities, a view Tan says is legally sound but mischaracterized in some media reports.

“So Hester Peirce said that an NFT that sends royalties back to the creator after a sale is not a security. This is correct, but the way some media reported this is completely out of context,” Tan told Cointelegraph. “The actual context is that this is not controversial, and it was never considered a security.”

The lawyer said US securities law focuses on regulating investments and not compensating creators for their work.

“The artist or creator is not an investor, not a passive third party in the NFT,” he said, noting that royalty payments are not considered investment income.

Instead, Tan told Cointelegraph that this type of earning is “analogous to business income,” which the SEC does not regulate. He added:

“The SEC never prohibited contracts where artists and creators get royalties from secondary sales of their work, not royalties from paper contracts or blockchain protocols.”

Tan explained that the legal distinction becomes more complicated when NFTs promise shared profits from royalties to multiple holders beyond the original creator.

Tan also urged regulators and market participants to apply traditional legal reasoning to new blockchain technologies. “Ask yourself, if this were done by pen and paper instead of blockchain, would there still be a regulatory issue?” he said. “If none, slow down.”

OpenSea calls on the SEC to exempt NFT marketplaces from oversight

While NFT royalties may not have been a controversial SEC issue, NFT marketplaces are a different case. In August 2024, NFT trading platform OpenSea received a Wells notice from the SEC, alleging that NFTs traded on the marketplace could qualify as unregistered securities.

On Feb. 22, OpenSea CEO Devin Finzer announced that the SEC has officially closed its investigation into the platform. The executive said that this was a win for the industry.

Following the conclusion of the SEC’s investigation, OpenSea’s lawyers penned a letter to Peirce, who leads the SEC’s Crypto Task Force. OpenSea general counsel Adele Faure and deputy general counsel Laura Brookover said in an April 9 letter that NFT marketplaces don’t qualify as brokers under US securities laws.

The lawyers said the marketplaces don’t execute transactions or act as intermediaries. The lawyers urged the SEC to “clearly state that NFT marketplaces like OpenSea do not qualify as exchanges under federal securities laws.”

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