The European Union (EU) policymakers just drafted a bill to tighten regulation on cryptocurrency exchanges. The new directive requires crypto-related companies to release certain details about their customers for taxation.
According to the report, the EU would get ready to accumulate 2.4 billion euros in the event that its proposal was approved.
In addition, one of the conditions that must be met before this initiative can be considered a success is that crypto-assets must be acknowledged as a valid method of payment or investment. Also, a clear definition of the taxpayer is still a fundamental requirement.
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Regulators Want More Transparency
The directive will put an end to anonymous transactions on bitcoin exchanges. These are the financial resources that authorities believe were utilized to fund extremist attacks.
Accordingly, crypto exchanges and companies that provide crypto services to customers will be obligated to disclose personal information about their users, such as where these users live, where they were born, and how much money they have spent on and got from cryptocurrencies.
The legislation will apply to operators of crypto-assets that work with EU residents, regardless of whether the companies themselves are based in the EU or not.
By taking this step, the EU hopes to improve its ability to monitor money laundering as well as the financing of terrorist organizations through exchanges for virtual currencies.
The agreement is also a component of a larger package of measures aimed at combating financial crimes and preventing tax evasion.
“Transparency on income earned by crypto-asset investors would improve the level playing field with more traditional assets,” as outlined in the new bill.
More Regulations are Here
Global regulators generally believe that cryptocurrency trading is a successful activity that requires taxation. Countries are still attempting to remove legal loopholes with digital currencies by enacting new rules, particularly on taxation.
The EU is rushing to complete its cryptocurrency market rules – Market in Crypto-Assets (MiCA). The measures are designed to give legal certainty to cryptocurrencies that are not currently covered by EU legislation.
Following months of discussion and negotiations that ended in a preliminary agreement on June 30, the European Parliament will vote on the implementation of cryptocurrency market regulation (MiCA).
The poll is scheduled for February. European authorities claim that implementing MiCA will result in standardized rules for cryptocurrencies across the EU.
The strong development of digital currency and its underlying technology has drawn many interests to the sector, and obviously lots of scrutinies. Meanwhile, the authorities of most countries have difficulties building a legal framework as well as a management method.
The use of cryptocurrencies makes combating money laundering and other illegal activities more difficult.
Because of the internationally accessible nature of crypto and the ecosystem in which it exists and develops, the potential risks are related to the subject’s ability to swiftly anonymize themselves, which makes it impossible to identify and verify the individuals who are taking part in the transaction.
When transactions are broken down into various levels of implementation in a variety of jurisdictions and regions, the responsibility for crypto compliance, oversight, and enforcement cannot be visible and specific.
As a direct consequence of this, establishing and putting into practice centralized monitoring and administration is an almost impossible task.
Crypto assets have posed considerable risks of hackers obtaining information, accessing digital wallets, and impersonating transactions. Since it’s a nascent industry, market players who are unprepared will become prey to illicit parties.
Poor risk management can expose crypto to forgery and fraud, resulting in claims that are not supported by the issuers’ available assets.
There is also the issue of anonymity and decentralization. The anonymous transactions, while being a beneficial nature of cryptocurrency, are also ideal means for criminals to conduct money laundering and other illicit acts.
Crypto crimes are more difficult to detect than traditional-asset fraud due to cloaking technology and specific software to steal.
If passed, the draft policy will apply to both centralized and decentralized exchanges, raising privacy concerns among customers. The directive also puts pressure on cryptocurrency companies, leaving them to deal with a massive volume of data.
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