The EU increases the focus on NFTs in leaked drafts of money laundering legislation
Lawmakers in the European Parliament are proposing changes to the upcoming EU anti-money laundering bill to emphasize that NFT platforms and companies offering NFT-related services are within the scope of the regulation.
The proposed change to the anti-money laundering (AML) rules fills a noticeable gap in the EU’s landmark Markets in Crypto-Assets (MiCA) regulation, which currently excludes non-fungible tokens (NFTs) from its mandate.
“NFT platforms are not covered by the current definition of providers of crypto-asset service providers under the MiCA Regulation to the extent that they do not offer services in crypto-assets that are fungible and non-unique,” a leaked draft of the AML proposal says. reportedly confirmed by sources familiar with the negotiation.
The proposal concluded that “in order to close this gap and reduce associated money laundering and terrorist financing risks, NFT platforms should therefore be included in the horizontal AML/CFT framework as a separate category of obliged entities.”
This new draft appears to confirm reports from last September that the European Parliament was pushing to include decentralized finance, decentralized autonomous organizations (DAOs) and NFTs in anti-money laundering provisions – areas not previously covered by the EU’s original proposal for the incoming AML/CFT legislative package.
This latest update follows news in January that French regulators called for tougher regulations to prevent a repeat of 2022’s crises and collapses in the digital asset space, and the language of the leaked AML proposal further indicates that the EU is determined not to leave something digital. the asset stone is unchanged with its extensive regulatory changes.
The changes will have to be adopted in a vote on March 28, followed by a vote on the full text, but if it passes platform operators and issuers of NFTs who thought they were off the hook will need to pay particular attention to the AML rules when stepping in force, or may come into conflict with the EU’s new AML authority.
AML and MiCA
In July 2021, the European Commission announced an ambitious package of legislative proposals aimed at strengthening the bloc’s anti-money laundering and countering the financing of terrorism (AML/CFT) rules. The package includes the Sixth AML/CFT Directive, new AML/CFT regulations – such as setting an EU-wide cap of €10,000 ($10,688) on large cash payments – and a proposal to create a new authority to fight money laundering, Anti-Money Laundering Authority (AMLA).
The expansive package gave AMLA oversight of digital asset companies’ activities in all EU member states, and the agency will also enforce the comprehensive MiCA framework in anti-money laundering and terrorist financing cases related to digital asset companies. The aim is to improve the detection of suspicious transactions and close regulatory loopholes.
AMLA is expected to be operational in 2024, just in time for the MiCA regulations, which should come into force that year if they pass their final vote next month – the vote was pushed back from February to April 2023 due to problems translating nearly 400 -page file for the 24 official languages in the block.
NFTs being put under stricter scrutiny by the soon-to-be AMLA fills a void in the MiCA regulation that caught some unprepared or possibly over-prepared.
Malta ahead of the curve
In December 2022, Malta’s Financial Services Authority indicated that it would remove NFTs from the Virtual Financial Asset (VFA) regulation in preparation for MiCA coming into effect.
Malta’s VFA regulation had one of the more stringent regulations, setting specific requirements for NFTs at launch, including producing a product white paper prior to issuance.
However, the Malta Financial Services Authority (MFSA), which governs the area, cited the upcoming EU regime as the reason for dropping NFTs from its regulation, saying MiCA will “exclude crypto-assets that are unique and cannot be exchanged with others crypto-assets.from the scope, eliminating the need for any form of authorization when engaging in the issuance or provision of services in relation to NFTs.
Ironically, another future regulatory regime now seems intent on putting NFTs back on the enforcement agenda, at least from an anti-money laundering and anti-terrorism perspective.
The EU has said it will review its policy on NFTs with regard to their absence from the MiCA regulation: “Within 18 months, the European Commission will be tasked with preparing a comprehensive assessment and, if deemed necessary, a specific, proportionate and horizontal bill to create a regime for NFTs and address the new risks of such a new market.”
While the European Commission observes the implementation of MiCA and considers whether and how best to include NFTs in a more comprehensive regime, it appears that the unique assets will at least face some regulatory scrutiny in terms of AML/CFT- matters.
See: Metaverse, NFTs and Blockchain
width=”560″ height=”315″ frameborder=”0″ allowfullscreen=”allowfullscreen”>
New to Bitcoin? Check out CoinGeeks Bitcoin for beginners section, the ultimate resource guide for learning more about Bitcoin – as originally envisioned by Satoshi Nakamoto – and blockchain.
