5AMLD – 5th Anti-Money Laundering Directive: Cryptocurrencies

Although much of 5MLD’s content updates the 4MLD, it makes a significant new legislative step in the treatment of virtual currencies. In more detail, 5MLD introduces the following measures:

• A legal definition of cryptocurrency, which may broadly be regarded as “a digital representation of value that can be digitally transferred, stored or traded and is accepted… as a medium of exchange”.

• Cryptocurrencies and cryptocurrency exchanges are considered “obliged entities”, and face the same CFT/AML regulations applied to financial institutions under 4MLD. Practically, this involves an obligation to perform customer due diligence (CDD), and submit suspicious activity reports (SAR).

• 5MLD actually goes further than 4MLD in its reporting obligations, by giving Financial Intelligence Units (FIU) a mandate to obtain the addresses and identities of owners of virtual currency – and so push back against the anonymity associated with the use of cryptocurrency.

• 5MLD also introduces regulation for providers of cryptocurrency exchanges and wallets – which must now be registered with the competent authorities in their domestic locations, for example, Germany’s BaFin, or the UK’s Financial Conduct Authority.

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