Insiders Weigh January Deadline for Bold AML Regulations Targeting Bitcoin and Crypto Exchanges
The European Union’s Fifth Money Laundering Directive (5MLD), published in April, is expected to be implemented in the UK on January 10, 2020. The legislation attempts to influence open-source software, making it subject to customer due diligence and anti-money laundering requirements.
Through the directive, HM Treasury is attempting to regulate digital assets, the open-source community and developers who write code that facilitates Bitcoin and crypto transactions.
The closing date for comments on the scope of the directive, which targets a range of activities, services and providers in the crypto space, was June 10th, after which policymakers are tasked with drafting the formal amendments.
Under review and within the scope of 5MLDCrypto-to-crypto exchange service providers Peer-to-peer exchange service providers (firms that facilitate the exchange of fiat currencies and cryptoassets Bitcoin and crypto ATMs Issuance of new cryptoassets, for example through initial coin offerings (ICOs) The publication of open-source software (which includes, but is not limited to, non-custodian wallet software
In the latest episode of Magical Crypto Friends, insiders Charlie Lee, creator of Litecoin; Samson Mow, CSO of Blockstream and CEO of Pixelmatic; Riccardo Spagni, lead maintainer of Monero; and trader WhalePanda, agree that the new legislation is unenforceable.
“The thing that regulators are struggling with is, for the longest time, they’ve been able to palm the responsibility of doing any sort of law enforcement, financial law enforcement, off onto banks and onto financial processes of any sort.
Now, suddenly, that whole paradigm shifted, and you’ve just got software. And they’re like, ‘How do we continue to palm responsibility of law enforcement agencies off onto companies?’ But you can’t. So maybe what we can do is palm it off onto Joe the C++ developer, which is meaningless.”
Lee says the policy doesn’t make sense, and Mow wonders how it could work if the developer is anonymous, underscoring how regulators are challenged by the basic principles of much of the tech underpinning not only cryptocurrencies but also the internet.
The Electronic Frontier Foundation and the UK Open Rights Group also argue that free and open-source software (FOSS) is a group endeavor comprised of people living in multiple jurisdictions.
“Consequently, the functionality of specific open source projects, their authors, and the provenance of its creation and distribution is almost impossible to locate. Code in the open source ecology is almost always built from many other pieces of code: a hundred lines of code used in a cryptocurrency program may have dozens of authors, none of whom wrote it for that purpose because each piece of code will be written as generally as possible. Similarly, code written as part of a cryptocurrency tool may be valuably re-purposed and adapted for other uses.”
They call efforts to force today’s open-source software publishers to follow financial regulations that are designed to go after criminals engaged in money laundering “obtuse”.
HM Treasury has yet to publish responses to its April consultation.
Featured Image: Shutterstock/Herschel Hoffmeyer