As regulators continue to provide no clear regulations about cryptocurrencies and how it fits into the global economy, businesses in this sector continue to struggle forward. Uncertainties like whether projects raising funds with cryptocurrencies like Bitcoin or Ether should be subject to federal registration and disclosure requirements are still a major issue in most jurisdictions.
Recent times have seen the popularity and utility of cryptocurrencies peak, and it has also become a popular mode for transferring wealth related to various illicit activities. This, alongside problems like money laundering and terrorist funding, has been some of the primary reasons why regulators are pressing down on crypto regulations.
These unfavorable conditions often create an environment that is not suitable for businesses that solely rely on the use of digital assets in the real-world. Most businesses migrate towards greener pastures towards rising crypto hotspots where the regulations don’t choke operations.
Europe has had these issues for long. The regulatory crackdown on crypto projects since Libra has been a huge problem for the crypto companies that were based inside European borders.
Deribit escapes 5AMLD
Some crypto firms closed down in response, citing issues of customer privacy, while Crypto derivatives exchange Deribit is leaving the European Union for Panama to avoid new AML rules while changing its Know Your Customer (KYC) requirements.
Europe recently announced the Fifth Anti-Money Laundering Directive (5AMLD) last month that is set to be implemented throughout the nation on January 10, 2020. This is also going to be the first nationwide directive that aims at introducing more transparency within the system to help fight money laundering and terrorist financing.
The Netherlands based company, Deribit B.V, will be handing over control of Deribit to its subsidiary DRB Panama on February 10, 2020, as per the announcement.
The 5AMLD directives address Cryptocurrencies as ‘obliged entities’, set to be subject to the same regulations applied to institutions under the 4AMLD, including combating the financing of terrorism and money laundering. This involves an obligation to perform customer due diligence and submit suspicious activity reports.
Due to the tightening of regulatory demands, the exchange has decided to move to Panama. A part of the announcement reads:
“We believe that crypto markets should be freely available to most, and the new regulations would put too high barriers for the majority of traders, both — regulatory and cost-wise.”
New home new rules
Besides the move, the exchange also noted some changes to its terms and privacy policies and KYC rules as the company plans on using the verification and payment company Jumio as well as software company Chainalysis in the process.
From here on the company will classify customers by different levels where higher levels would have access to more services while facing stricter KYC.
Technology has always played a key role in the economic growth of a nation. The modern-day economy is slowly going completely digital, and cryptocurrencies and blockchain technology are acting as the bridge between the two sectors.
Global adoption is still a long way from reality; but the entire industry has grown immensely in a trifling amount of time compared to the fiat economy. As more nations become interested in the implications of blockchain technology, one can hope that regulations would soon be drafted where the crypto economy would flourish.