EU Unveils AMLD5: Will Anti-Money Laundering Law Winnow the Global Business of Cryptocurrency?

by: The Knowledge Group

May 14, 2020


In early 2020, the European Union’s new legislation came into force to prevent money laundering, and it includes digital assets. The change is affecting Germany’s second-largest stock exchange, Boerse Stuttgart. Its chief digital officer, Ulli Spankowski, has observed institutional interest in cryptocurrency rise in the wake of the new law. The reasons might have something to do with the way the law has filtered out companies.

The Fifth Anti-Money Laundering Directive (AMLD5) Requires:

  • The registration of all EU-based crypto companies with their country’s regulators.
  • Know Your Customer checks throughout all companies.
  • Recordkeeping on the source of funds that clients use in order to purchase assets.

On account of the compliance burden, several cryptocurrency companies focused on mining, social media, and gaming left the space. The Dutch derivatives exchange Deribit opted to move to Panama because the Netherlands has adopted a version of AMLD5 that most of its traders can’t bear, either in terms of regulatory compliance or costs, which will be stringent throughout the EU and beyond. For British companies, registration with the Financial Conduct Authority will cost £5,000 ($6,500), plus annual renewals.

Institutional Demand for Cryptocurrencies Rises

Dr. Spankowski, recently presenting at a crypto asset conference in London, underscored that financial institutions could already facilitate custody and trading of crypto assets.

Last year, for example, the Boerse Stuttgart Digital Exchange, which boasts more than 120 institutional participants, introduced its bitcoin-euro spot pair. Today, it’s acceptable for institutional investors to take bitcoin seriously, in Spankowski’s view.

Now, with new EU policing in place, institutional interest should strengthen still further. In AMLD5, the EU has set a high standard. Other countries are likely to follow. Meanwhile, expect the new registration and fee obligations to pare down the crypto field.