The EU has recently been very active in attempting to regulate digital currencies, including bitcoin. Last week, Bitcoin.com reported on the European Parliament’s proposal to amend the EU’s fourth Anti-Money Laundering Directive (AMLD), tackling digital currency anonymity. Now, a different proposal submitted by Parliament members is targeting specific areas of digital currency applicable to the EU fintech framework, including “unpermissioned” blockchains.
Many of the EU’s efforts to regulate digital currencies have been through amending the AMLD. Still in its early stage of the EU legislative process, this new proposal seeks to amend an existing EU fintech proposal called ‘Fintech: the influence of technology on the future of the financial sector (2016/2243(INI))’. In a recent draft report, members of the European Parliament urge the European Commission to consider several amendments directly concerning bitcoin and other digital currencies.
Investigating the Role of Bitcoin Mixers
In one amendment, Parliament members call on the European Commission to investigate the role of bitcoin mixers. Amendment 257, paragraph 16, reads:
[The Parliament] Is concerned by the increased use of unpermissioned blockchain applications, in particular Bitcoin, for criminal activities, tax evasion, tax avoidance and money laundering; calls on the Commission to investigate the role of bitcoin mixers in this process.
This proposed amendment follows a global conference on countering money laundering and digital currencies in January which more than 400 financial investigators attending, including the FATF, Interpol, Europol, CEPOL and the Basel Institute on Governance. During the event, participants were told that: “All countries are advised to take action against Digital Currencies Mixers/Tumblers”.
Energy Usage and VAT
Some amendments in the proposal revolve around Bitcoin mining’s “high energy” usage such as Amendments 159 and 252. One amendment reads:
[Parliament] Notes that some implementations of DLT technology such as the Bitcoin blockchain have extremely energy intensive computational requirements and that, therefore, research should be encouraged to find ways of mining and verification that are energy efficient, especially for large scale uses.
Some benefits of digital currencies and blockchains were also added to Amendments 160 through 162, including competition of currencies and using an altcoin for solar energy credits. The Parliament “stresses that the current emergence of currency competition between national currencies and private virtual currencies could benefit innovation and price stability”, one proposal reads.
Fintech and blockchain initiatives such as a solar coin as well as research to achieve “environmentally responsible energy use and behaviour” are also welcomed, according to Amendment 162, in order to “reduce the environmental cost of Bitcoin-mining and related activities”.
Another amendment concerning bitcoin is one where taxation of payments made with digital currencies was suggested. In October 2015, the EU Court of Justice ruled that bitcoin transactions are exempt from Value-Added Tax (VAT) “under the provision concerning transactions relating to ‘currency, bank notes and coins used as legal tender’”. A Parliament member added Amendment 160 which reads:
[The Parliament] Calls on the commission to amend the VAT Directive so as to include into that payments made by virtual currencies.
Images courtesy of Shutterstock