EU Anti-Money Laundering, Digital Currencies and Privacy

Through an examination of the underlying technology driving digital currencies, this book offers a comprehensive understanding of the mechanisms governing their operation, clarifying complex legal concepts and confronting the pressing issue of anonymity inherent in digital currency transactions.

The book focuses on two categories of digital currencies: cryptocurrencies (eg, bitcoin) and in-game currencies (the currencies used in the closed virtual environment of a game). Despite their differences in governance – cryptocurrencies being decentralised and in-game currencies being centralised – they share significant similarities in terms of anonymity, which presents a notable issue within the anti-money laundering (AML) framework.

Against the backdrop of both the international AML standards developed by the Financial Action Task Force (FATF) and the European Union AML regime, the book examines the AML compliance stage of the private sector and, specifically, the collection and retention of data relating to digital currency users. It analyses the new AML Regulation, alongside the 5th AML Directive, the Market in Crypto-Assets (MiCA) Regulation and the ‘Travel Rule’ Regulation, to construct a complete picture of the obligations imposed on virtual asset service providers and to assess whether the new framework disproportionately interferes with the right to privacy and data protection of the end user. In doing so, the book offers the first legal assessment of the proportionality of private-sector AML obligations in the field of digital currencies based on the argument that, in this context, EU AML law is increasingly transforming into a surveillance regime.