New EU regulation on "virtual currency" exchanges

Hi there. A pal from pointed me to this article: [European] Commission strengthens transparency rules to tackle terrorism financing, tax avoidance and money laundering. It looks like the European Comission wants to review the Anti-Money Laundering Directive in a way that could affect altcoin exchanges (because they are a nest of damn terrorists, you know). This is the relevant passage:

Tackling terrorist financing risks linked to virtual currencies: to prevent misuse of virtual currencies for money laundering and terrorist financing purposes, the Commission proposes to bring virtual currency exchange platforms and custodian wallet providers under the scope of the Anti-Money Laundering Directive. These entities will have to apply customer due diligence controls when exchanging virtual for real currencies, ending the anonymity associated with such exchanges;

I’m not a lawyer but I’m not sure whether Bitsquare would fall under this point, since the fiat/altcoin exchange itself is done by other external means, and the Directive may affect these but not Bitsquare itself.

What do you think of this? May it be a risk for Bitsquare, or rather an opportunity?

All Regulation is an opportunity for Bitsquare! Bitsquare is a network without a legal entity so far. But many self imposed limitations. Anyway, its sad that one thinks that one needs a lawyer to understand law isn’t it ?!

“The Juncker Commission has made the fight against tax avoidance, money laundering and terrorism financing one of its priorities.”

Funny, when you read a bit in Wikipedia about Juncker it turns out he took a major role making Luxembourg a tax haven for companies. He was also responsible that Luxembourgs secret services where operating completely out of control and without transparency (but thats only in the german wiki…). So I am sure he is the man Europe needs :-).

But anyway, usual politics stuff…
Remembers on Wolfgang Schaeuble who commited tax crimes himself and is the hardliner in Germany against Bitcoin bringing the same arguments on the table for what he nearly went to jail himself (would have, if he would not have been politician).

But back to the content:
One thing is that companies holding users funds (crypto or fiat) will be subject to regulations like banks. That is logical to some extent as they are responsible as a 3rd party and carry considerable risks.
I am not surprised about that.
And it might be actually good for the crypto space to get rid of those “Bitcoin banks” or “custodian wallet providers” - they were never really following the principles of Bitcoin - to remove trusted 3rd parties. We can do better. Be your own bank.

How and if they can apply those directives to P2P exchanges like Bitsquare seems to be not clear from the article. But as their stated goal is financial surveilance and not consumer protection I fear they will find their ways to apply that also to P2P exchanges which are not holding users funds or data. It is not about consumer protection, it is about surveilance.

So it comes to the question how much legitimation we give to governmental bodies, run by people who are often heavily invovled with crimes in the past, if they apply laws and regulations which are not created for the people but for the governments to extract more efficiently money from their citizens?
I fear this is just another sign that the governments long have left the road of legitmiation.
Bitcoin will force them to redefine themselves - as a tool for organizing public goods and services.
If that will happen or not is in our hands.
Will not be a walk in the park for sure…

Juncker is the perfect embodiment of everything that is wrong with Europe. The UK strongly opposed his appointment and some people like the Czech foreign minister have gone as far as to say he is the reason Brits voted to leave the EU ( ).

I hope they will not be able to apply these things to Bitsquare, but if they do then somebody will just release a fork anonymously - then see what they can do about that. I think ultimately they will know this and won’t try to do something that is not really possible like regulating peer to peer exchange.

Bitcoin magazine article to the topic:

Seems to imply that Bitsquare wouldn’t be affected as it doesn’t hold users’ private keys, yes?

Regarding custodial services, yes Bitsquare is doing nothing custodial. But I assume they are more targeting financial privacy. We will see how it plays out, there where some comments about registering your addresses with your identity, similar to that what ChainAnchor was planning.
Seems Bitcoin is entering a new level in the game with the banks/govs.

When they discover Bitsquare, Mycelium local trader and similar systems, they will simply make a new law such that these platforms also need to do surveillance. Right now I don’t think they have to since they don’t handle customers funds. I guess they need to subject also Satoshi Squares to new laws although I am not sure how they will phrase the law.
The key thing is proof of responsibility and AFAIK they will be paralysed by p2p, open source and forks.
There will have troubles even with conventional btc-companies often being localised in strange jurisdictions. I presume they will try even harder to trace fiat transactions.

I guess I am saying that bitsquare will not be affected initially, only when the state discover how powerful it is. But they cannot do much.

Following the thread, my pal sends me this piece of news which is not so related with exchanges, but hints more steps from the EC in the same line: create a central registry for state financial agencies to know the real identities behind cryptocurrency addresses.

The proposal includes reasons that would be regarded as totalitarian bullshit by most of people if applied to normal chash, e.g. that cryptocurrencies’ anonymity and their use for criminal activities make them more difficult to trust.