Author: Xiao Sa Team, Xiao Sa Lawyer
The Sa Team noticed that around mid-January 2024, the European Union, as the first jurisdiction in the world to establish a comprehensive cryptocurrency regulatory framework, proposed to further tighten the regulations on cryptocurrency transfers and private wallet supervision in its comprehensive anti-money laundering rules. This includes restricting anonymous transactions and increasing the platform's KYC obligations.
On March 23, the European Parliament and the European Council officially turned the above idea into reality by introducing the latest anti-money laundering "unboxing order." Today, the Sa Team will interpret the new law and analyze the potential demonstration effect it may have in the future.
I. Overview of the Latest EU Cryptocurrency "Unboxing Order"
"Unboxing" was originally an industry term, referring to the act of exposing a netizen's real identity information, similar to "doxing." The European Parliament and the European Council have introduced the latest anti-money laundering regulations for cryptocurrencies, aiming to "erase" the anonymity of cryptocurrency transactions to regulate money laundering, tax evasion, and asset transfer using cryptocurrencies. The main rules are: (1) Within the EU's jurisdiction, no unidentified self-hosted cryptocurrency wallets (i.e., private wallets) can be used for any scale of cryptocurrency payments; (2) Cryptocurrency companies must conduct due diligence on transactions over 1000 euros. The main subjects regulated by this provision are cryptocurrency users and Virtual Asset Service Providers (VASPs).
The Sa Team believes that the latest EU cryptocurrency "unboxing order" is a regulation with both pros and cons. On the one hand, in conjunction with the previously enacted MiCA bill and the rules for collecting cryptocurrency transfer information (TFR), it can effectively regulate crimes such as money laundering, tax evasion, and asset transfer using cryptocurrencies. However, on the other hand, the "unboxing order" is also very aggressive, directly eliminating the anonymity, a core and essential feature of cryptocurrencies, and shaking the financial ecosystem established based on decentralized blockchain technology.
Overall, not only is the regulation of cryptocurrencies becoming stricter, but the new anti-money laundering law in the EU also imposes strict controls on all tools and channels that can be used for money laundering. In the new anti-money laundering law, the use of undisclosed cash payments over 3000 euros in commercial transactions is prohibited, and cash payments of 10,000 euros fall into the category of complete prohibition for commercial transactions. Additionally, entities in the luxury goods industry must conduct identity verification similar to KYC on customer transactions for inspection purposes. The professional football industry, previously a hotspot for money laundering, will be closely monitored by the EU, and several well-known teams have already begun compliance reforms in anticipation of meeting the standards after the formal implementation of the new anti-money laundering law in the next three years.
II. Impact of the Latest EU Cryptocurrency "Unboxing Order"
As mentioned earlier, the latest EU cryptocurrency "unboxing order" indeed has significant positive and negative impacts. As a major jurisdiction, its related legislation and judiciary will have an important regulatory demonstration effect on the entire cryptocurrency industry. How should we correctly view this butterfly effect of EU regulation?
From a positive perspective, the "unboxing order" does not prohibit the existence of cryptocurrencies or restrict users from using them. Instead, it imposes a heavy "shackle" on users and VASPs, requiring them to use and invest in cryptocurrencies in an open and regulated environment, and does not rule out the possibility of taxing users for holding and trading cryptocurrencies. Compared to an outright ban on cryptocurrencies, this is undoubtedly a more "flexible" regulatory measure, consistent with the Sa Team's consistent attitude towards cryptocurrencies: regulation should be lenient rather than strict.
However, this relatively "flexible" regulation also has a tough side. The Sa Team believes that the core reason why the cryptocurrency community and many Web3 participants and builders recognize and believe in blockchain technology and the related narrative of cryptocurrencies is that these assets have unique "technical trust" characteristics. They can operate without centralized supervision and give users the freedom to control their assets. Once the "unboxing order" removes the anonymity of cryptocurrencies, it will hinder users' freedom to control their assets and, more critically, allow traditional centralized regulatory power to spread to the cryptocurrency community.
In reality, every time the EU tightens regulations in the name of "public safety," "financial security," and "combating money laundering," it has not gained the support of the majority of the public. For example, when the European Commission publicly solicited opinions on the cash payment restriction bill in 2017, over 90% of citizens opposed the bill. The biggest objection was that this approach did not effectively stop systematic money laundering but instead improperly restricted citizens' freedom to use their own property.
From this perspective, the Sa Team believes that the EU's "unboxing order" may be overcorrecting. Once officially implemented, it will be difficult to find a proper balance among various legal interests such as financial, technological innovation, financial order, and social order security. Instead, it may push EU cryptocurrency users away from the path of gradually compliant cryptocurrency usage and into unregulated cryptocurrency camps. VASPs will face heavy KYC obligations and the dilemma of gradually losing cryptocurrency users.
III. Does the Latest EU Cryptocurrency "Unboxing Order" Cover Other Cryptocurrencies Besides Cryptocurrencies?
A simple answer: the "unboxing order" currently only affects cryptocurrency transactions, but it does not rule out the possibility of covering other cryptocurrencies in the future.
At present, the purpose of the "unboxing order" is to restrain the largest cryptocurrency in terms of volume within the cryptocurrency market. Although there has been intense debate within EU regulatory agencies on whether a comprehensive set of anti-money laundering regulations should apply to other cryptocurrencies and Web3 play methods such as NFTs, DeFi, and GameFi, there is no clear indication in the legislation that the EU will regulate other cryptocurrencies besides cryptocurrencies.
The Sa Team believes that this is mainly due to two reasons: (1) Other cryptocurrencies besides cryptocurrencies have a small volume and, although they have the potential to replace cryptocurrencies, they do not currently have a large enough market to be used as tools for money laundering, tax evasion, and other criminal activities; (2) The EU still maintains a cautious approach to cryptocurrency regulation, unwilling to include other cryptocurrencies in the institutional framework until they have matured and their related technologies have reached widespread application.
Therefore, it can be concluded that the successful development of other cryptocurrencies and various play methods in the future will largely depend on the joint efforts of Web3 builders to form a relatively effective self-supervision and self-driving mechanism, in order to reach a consensus with regulators and form a united front.
IV. Conclusion
From the perspective of EU judicial practice, although the "unboxing order" will only be officially implemented after a three-year transition period, the purpose of this period is only for compliance reforms. In other words, within the EU's jurisdiction, self-hosted wallets can no longer be used for anonymous cryptocurrency payments. In communications with some cryptocurrency practitioners, the Sa Team found that opinions on this matter vary. Some experts in favor of a free business environment believe that the "unboxing order" is a blow to the EU's free competitive business system and may even infringe on basic civil rights.
The Sa Team believes that, just as we cannot easily pass judgment on a new phenomenon, in the current environment where cryptocurrency-related crimes are rampant, the pros and cons of the "unboxing order" should be evaluated based on its subsequent implementation. While the EU currently lacks sufficient statements on the effectiveness and necessity of the "unboxing order" in combating crime, the EU itself, as a pioneer willing to be the first to regulate cryptocurrencies, at least deserves encouragement for its courage.
免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。
