The EU Commission has proposed an amendment (Proposal) to Article 2 of Directive 2015/849, namely the 4th Anti-Money Laundering Directive (4AMLD), “in order to add to the list of obliged [regulated] entities virtual currency exchange platforms as well as custodian wallet providers”. These are broadly speaking, from the Commission’s point of view, the “Gatekeepers” into virtual currencies.
The Commission has defined these Gatekeepers in more detail as follows:
“(g) providers engaged primarily and professionally in exchange services between virtual currencies and fiat currencies;
(h) wallet providers offering custodial services of credentials necessary to access virtual currencies.”
In addition, for legal certainty, the Commission has provided a definition of “Virtual Currency” as follows:
“’virtual currencies’ means a digital representation of value that is neither issued by a central bank or a public authority, nor necessarily attached to a fiat currency, but is accepted by natural or legal persons as a means of payment and can be transferred, stored or traded electronically.” Expressly excluded from this definition of Virtual Currency are ‘local currencies’ (see p22 (8)). This is a remarkably wide definition of virtual currency and does not follow the explicit ‘convertibility’ distinction FATF uses (see FATF Report P.27).
The implication of this Proposal (once/if adopted by EU Parliament and EU Council) is the requirement for virtual currency exchanges and custodian wallets to register with the relevant supervisory authority in their jurisdiction and comply with the AML requirements of 4AMLD, which includes by way of example, a requirement to conduct Customer Due Diligence in Article 11 (KYC).
The EU Commission suggests a fairly tight timetable for implementation into national law of 4AMLD. It expects Member States to have transposed the Directive by January 2017. As such, virtual currency exchanges and custodian wallets should, if not already, seek to gradually introduce internal controls to adhere to 4AMLD before the expected deadline.