The European Parliament’s Policy Department for Economic, Scientific and Quality of Life Policies recently published a new report covering the threats and concerns originating from crypto and digital assets, including (1) the role of crypto in financial crimes; (2) the lack of clarity on stablecoins; (3) whether financial institutions such as banks should be allowed to onboard crypto assets and (4) cybersecurity.
Surprisingly, the policy department chose stablecoins to be more of a concern than the central bank digital currency (CBDC). Stablecoins with a “local footprint” are acceptable, but when stablecoins attempt to become global in scope, such as the case of Facebook’s Libra in its initial stages, the threats to existing financial and monetary systems cannot be overlooked.
The report’s findings conclude that while the crypto landscape has undergone huge transformations since 2017, EU crypto regulations have largely remained unchanged and are unable to keep up in detecting and combating the full scope of illegal crypto-related activities happening at present. On the other hand, the Financial Action Task Force (FATF) has been regularly updating their recommendations for high risk crypto-related activities, and the policy department proposed for the EU to set up a ‘European AML watchdog’ made up of specialists that will focus exclusively on AML/CFT risk analysis.
“When enhancing the regulatory framework with respect to criminal use of crypto-assets, the EU should be mindful to also enhance the investigative toolbox: to ensure compliance with the regulatory framework, law enforcement agencies at both EU level and Member State level must be able euto detect infractions and subsequently sanction them. Therefore, the EU should continue to invest in initiatives that add to the investigative toolbox of law enforcement agencies who are trying to track down ML/TF and other illicit activities such as tax evasion via crypto-assets,” the report reads.
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