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In a late success for the French presidency of the EU Council, negotiators from the European Parliament and the EU Council agreed to extend the rules on information accompanying the transfers of funds to crypto assets.
If the agreement is confirmed by the European Parliament and by member state governments, this regulation will introduce an obligation for service providers in the crypto world to collect information about their clients and make them accessible to authorities.
This should help authorities fight money laundering and the financing of illicit activities.
Preventing money laundering and fraud
“This new regulation strengthens the European framework to fight money-laundering, reduces the risks of fraud and makes crypto-assets more secure,” said the Green member of the European Parliament Ernest Urtasun, who is a co-rapporteur on this topic.
The other co-rapporteur, Assita Kanko from the right-wing European Conservatives and Reformists, said that “for too long, crypto-assets have been under the radar of our law enforcement authorities.”
“Today, we have taken a big step to address these problems,” she said, arguing that it would now be harder to misuse crypto-assets and that the crypto world would be made safer by this regulatory move.
The crypto sphere has been plagued by fraudulent Ponzi schemes in which some early movers, people with inside information, or blatant fraudsters made a lot of money to the detriment of later investors and uninformed citizens trying to participate in the heavily advertised crypto market.
After years of having let the crypto world run wild, this regulation is part of a general move by regulators to begin taking it seriously and to regulate it like any other financial service.
1/Deal! After months of negotiations with the Council, we agreed the most ambitious travel rule for transfers of crypto-assets in the world. We are putting an end to the wild west of unregulated crypto, closing major loopholes in the European anti-money laundering rules. Thread👇 pic.twitter.com/Jr9IAspsb8
— Ernest Urtasun (@ernesturtasun) June 29, 2022
And more is to come: Only half a day after the agreement on the transfer regulation was reached, the Parliament’s economy committee adopted a non-binding resolution calling on the European Commission to assess how crypto assets could be taxed and to make sure that they are appropriately taxed.
What kind of innovation?
Crypto promoters complained the transfer regulation would destroy the anonymity or pseudonymity that actors in the crypto world enjoyed. Moreover, they argued, the regulation would stifle innovation, sometimes going so far in their criticism as to resort to outright harassment of the EU lawmakers involved.
The question is what kind of innovation might be stifled by the additional transparency requirements or more regulation in general.
Bitcoin was started in 2009, and 13 years later, after billions of invested dollars, and enormous amounts of energy consumed, the crypto world has yet to come up with an innovation that comes close to the revolutionary potential it has ascribed to itself.
While crypto has certainly made some people rich, it is not at all clear whether it has provided any additional social value compared to your regular online casino.
Given the acute energy price crisis, the ongoing climate crisis, and the shortage in resources, it is unclear why an online casino that needs a lot of computer hardware and consumes more energy than some member states should be left running unimpeded.
In light of this, the regulatory boundaries set by EU regulators and the current meltdown of crypto prices could be taken as an opportunity for the crypto bubble to think about how to create real value for society, without relying on opaque dealings or speculative bubbles, and maybe even in a more energy-efficient way.
The parliamentary committee for the economy, meanwhile, has its own idea for how to use the potential of the blockchain, the technology that is the basis for much of the crypto ecosystem.
In its resolution, the committee suggested that blockchain technology could be used for a more efficient tax collection. Whether this aligns with the libertarian spirit of the first crypto pioneers is another question.
Chart of the Week
Telework has boomed during the pandemic. Figures from Eurostat show that while only 5.4% of the EU workforce reported usually working from home in 2019, 12% did so in 2020, and 13.4% in 2021.
More striking than this increase is the stark difference between member states. While 32% of the Irish teleworked last year, only 2.4% of Romanians worked from home then, revealing different kinds of workplaces and differences in how governments, companies, and workers reacted to the COVID pandemic.
Graph by Esther Snippe
The uptick in telework is also a challenge for organised labour because it is hard to ensure good working conditions if workers are hidden and dispersed in the privacy of their homes.
To face this challenge, social partners have agreed to negotiate a legally binding agreement on how the autonomous agreement on telework should be revised and updated. You can read the story here.
Literature Corner
A new European tool to deal with unjustified rising spreads: Bruegel’s Maria Demertzis and Grégory Claeys lay out some principles for the European Central Bank’s new tool that aims to control spreads.
Is telework really the green choice? Eurofund’s Martina Bisello looks at the climate balance of working from home.
Market myopia’s climate bubble: In this 2021 article, law professor Madison Condon takes a look at the reasons why financial markets do not fully integrate climate change-related risks into their asset prices. She argues that this might create a systemic risk to the financial system.
Are blockchains decentralised? Unintended centralities in distributed ledgers: A report commissioned by the Pentagon found that the crypto industry is not as decentralised as it claims to be. Instead, the report says that Bitcoin and Ethereum can more easily be manipulated than was previously thought.
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