The Anti Money Laundering Regulation of Crypto-assets in Europe: A Critical Analysis

The present analysis will explore how the legislator has responded to the introduction of blockchain technology and crypto-assets. As we will detail, blockchain introduces a new architecture for digital exchanges of value. One that substitutes the central intermediary with a decentralized network of cooperating nodes. By reshaping the architecture of digital exchange systems, blockchain undermines the fundamental premise underlying the preventive prong of the anti-money laundering policy strategy: the necessary intermediation of digital exchanges of value. The primary aim of the present research is to critically examine the impact of crypto-assets and blockchain on the financial monitoring infrastructure and the connected policy responses. Due to the disruptive nature of blockchain’s transaction model, this is a field that has known a great degree of innovation, particularly in Europe. The present decade will be fundamental in the definition of a European policy strategy for crypto-assets. The introduction of the Market in Crypto-asset Regulation (MiCaR) – the first comprehensive regulation of crypto-assets worldwide – and the upcoming Anti-money Laundering Package will shape how the Union approaches crypto-assets and its ability to reap their benefits while mitigating the risks. However, the present research also has a second, larger, purpose. Digitalization is altering the physiognomy of the world and human action. Rules that have been regarded as essential to human existence for centuries are now called into question. For instance, digital interaction systems allow continuous non-local exchanges freeing humans from their corporeal boundaries, artificial intelligence promises to create non-human autonomous decision makers. Within this changing architecture, the validity of legal tenets developed across eras is challenged forcing the legislator to reimagine its strategies in an unprecedented fashion. Taking anti-money laundering as a case study, the blockchain, by introducing the possibility to exchange value digitally in the absence of an intermediary, challenges the previous intermediary-based legislative strategy.5 The text will analyse how, and if, the policy maker has adapted to this new playing field. The perspective of the text is that a simple reiteration of pre-existing models is not adequate in the presence of fundamental architectural modifications. The legislator cannot simply stick to an “everything changes, nothing changes” approach. Rather, it should proactively engage with such architectures and imagine new solutions rooted in them. The ability to reinvent its strategy, and even its fundamental tenets, is key for the law to survive in a world that is changing in such a profound manner. It is with this double perspective that we invite the reader to approach the present analysis

From geographical innovation clusters towards virtual innovation clusters: The innovation virtual system

The opportunities of the new economic landscape have determined radical changes in the organizational structures of the firms, till the creation of new virtual clusterization forms, that is distinct systems of suppliers, distributors, service providers and clients that use the 'internetworking technologies' as a principal way for co-operating and competing. These 'virtual clusterization forms' that have been also defined as 'e-business communities' or 'b-web communities' (Tapscott, Lowy & Ticoll, 2000), are here defined as 'virtual clusters'. In a virtual cluster (VC), each enterprise adds one or more distinct aspects of product/service value to the value of the network, by exchanging digital knowledge with other members. Recent studies, focused on VCs, highlight that the VC enabling factors may be identified in ICTs ubiquity (increasingly wireless) and bandwidth robustness, that allow firms to access real-time what they need and to co-ordinate their intra and inter-firm activities, creating value both by offering innovative and personalized products, services and by cutting transaction costs. (Davin and Botkin, 1994) (Rayport and Sviokla, 1995). This paper focuses on these VCs innovation processes, in order to make some comparisons between the traditional geographical innovation clusters and the emerging virtual innovation clusters. To this end, the paper is organized in two logical patterns: Some empirical evidence for describing ad discussing the more important features of the emerging VCs. Specifically, the paper focuses on the following issues: - Some first results on VCs characteristics, regarding four distinctive features of their new world of business: i. Agents: radical increase in the number of agents that form a cluster. ii. Connections: virtually unlimited increase in the number of connections and therefore in the potential size of the cluster. iii. Space: delocalization of transactions which become space independent. iv. Time: information transmission takes place at the speed of electronic communication. - The analysis of the VC basic unit, the Internetworked Enterprise (IE), and of its learning process with customers and trough strategic alliances. A model of the VCs global virtual learning environment, here conceived as a system of innovation, defined as 'Innovation Virtual System' (IVS). IVS is here interpreted as a new way of projecting the traditional systems of innovation into a global scale.

Cryptocurrency Abuse for the Purposes of Money Laundering and Terrorism Financing: Policies and Practical Aspects in the European Union and North Macedonia

The number of countries that express concern for the danger of using cryptocurrencies for illegal activities among which are money laundering and terrorism financing is increasing. Cryptocurrencies are virtual assets created and managed through advanced computer encryption and operate on a decentralized network known as a blockchain. The key issue of concern and attention in the world is the anonymity and pseudonymity of cryptocurrencies, which prevents proper monitoring of transactions by state institutions and allows the completion of suspicious transactions outside the regulated systems. The paper provides an overview and presentation of the existing European legal framework and the measures and activities undertaken by the Republic of North Macedonia, harmonized with the European ones, in the fight against money laundering and terrorist financing in the crypto sector

Cryptocurrency exchange landscape in the EU How regulation impacts success of cryptocurrency exchanges

Ever since the emergence of digital assets, bitcoin (BTC) and other crype to currencies created huge debates and discussions globally. Demand has transformed trading opportunitis in the digital era, and anew ecosystem has been created around cryptocurrencies. Not only the coins, but the underlying technology has found many applications worldwide as well, especially in the financial markets.However, since the market infrastructure is growing expeditiously,regulations have a hard time keeping up with the speed of innovation. Merging this complex and fast evolving area into the established traditional legal framework has already proved to be a difficult and lengthy process. Due to the absence of a global harmony in the regulatory frameworks, digital service providers can take advantage of the regulatory arbitrage. In order to maximize profitability, the decision on how to cope with the regulatory framework can be crucial for any service provider.The attitude towards regulation in this environment is just as fragmented as the legislations itself. Founder and CEO of bit Flyer, Yuzo Kano made an announcement at the opening of the European office of bitFlyer:”When I set up bit Flyer in 2014, I did so with global ambitions and the belief that approved regulatory status is fundamental to the long-term future of Bitcoin and the virtual currency industry. I am proud that we are now the most compliant virtual currency exchange in the world; this coveted regulatory status gives our customers, our company and the virtual currency industry as a whole a verypositive future outlook[1].”A completely different approach was expressed by the CEO of Binance,Chang peng Zhao:“If you do fiat to crypto [. . . ] you have to have a bank account that can accept money,” he says. “That has its own advantages and problems. You have to deal with regulatory issues and usually you’retied to one country.”The more you deal with fiat, the more[authorities] can control you,” says Zhao. “The bank will freeze your bank account. They can make the wire transfer slow”[44].The strategical decisions of digital currency exchanges can be de-rived from their view on regulation. This paper will examine some of the top exchanges with a regional footprint in the European Union(EU). Furthermore, the impact of regulation on crypto exchanges will be analysed, based on the exchanges’ strategy and different success factors. The diversity of jurisdictions covered by this paper provides also an overview how various governments have approached regulat-ing digital exchanges. Even though the cryptocurrency market out-side of Europe should not be underestimated, this paper focuses on the comparative analysis on digital exchanges operating within the EU. Including other exchanges would alter the conclusion since the quoted crypto-fiat pairs, users, and many other factors diverge from the European landscape.The expectation is to conclude that regulatory compliant digital exchanges are more successful on a long-term perspective

MODELS OF STATE REGULATION OF THE VIRTUAL ASSETS MARKET IN OFFSHORE ZONES (ON THE EXAMPLE OF BERMUDA ISLANDS, GIBRALTAR, AND MALTA)

Since the emergence of the virtual currency Bitcoin in 2009, the problem of the development of an effective model of the virtual assets market regulation became extremely relevant for each country in the world. For the offshore zones, the emergence of the virtual assets market has become a new opportunity to attract investments while creating the simplest and clearest legal regulation. This paper aims to identify the concept similarities of the virtual assets market regulation in the offshore zones of Bermuda Islands, Gibraltar, and Malta. We found a tendency towards developing a new set of legislation specifically aimed at regulating the relations in the virtual assets market in selected jurisdictions. We argue that that the trend of introducing a mono-regulatory model of government regulation of the virtual assets market dominates in the offshore zones. However, we found that there are clear limits of the discretionary powers of the local regulators. Comparative regulatory practices of selected jurisdictions serve as a guide to improve the existing Ukrainian regulatory framework in this sphere and regulatory challenges, in order to assess urgent issues that the legislature and regulators are facing