The Impact of New EU Silos on Crypto Transactions

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The European Union has decided to limit cash purchases to 10,000 and provide more control over crypto transactions above 1,000.

Members of the bloc announced it on December 7, saying it was part of efforts to prevent money laundering.

New rule designed to close cryptographic loopholes

Czech Finance Minister Zbynk Stanjura said their “intention is to further close these loopholes and apply even stricter rules in all EU member states. Large cash payments over 10,000 will become impossible. Trying to remain anonymous when buying or selling crypto-assets will become much more difficult.

New AML/CFT rules require Crypto-Asset Service Providers (CASPs) to perform due diligence on customers transacting over 1000. Self-hosted wallets should increase their risk mitigation measures due to the advent of PSAPs.

The EU also uses the country classification system based on the recommendations of the Financial Action Task Force (FATF) to determine the risk of money laundering in each member country.

What impact will this have on DeFi?

It is unclear how the new requirements will be implemented as anonymity is an integral part of the existence of the DeFi space, but they should affect it.

Regulators can likely target DeFi platform developers. However, this may have no impact if the entity is not based in Europe and chooses not to comply.

It might even be more difficult if a central entity does not control the DeFi protocol or if it is impossible to identify the crypto firm behind it.

EU commissioned report on DeFi

The risks of DeFi and how to regulate the sector are currently being considered by regulators in Europe. A few months ago, the European Central Bank commissioned a study.

The study recommended that DeFi regulations cover DAOs, platform developers, and governance token holders.

Such a decision could affect the growth of the DeFi sector in Europe. But centralized crypto platforms will have no problem complying since they already implement AML/CFT standards.

European regulators are also questioning whether the MiCA regulations which are expected to come into force in 2024 can prevent a repeat of the FTX collapse. FTX has been licensed in Cyprus.

Disclaimer

BeInCrypto has reached out to a company or individual involved in the story for an official statement on recent developments, but has yet to receive a response.

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