Skip to content

Digital Currency regulation heats up in EU as law seeks to identify Bitcoin Users and End anonymity

European Union has been an ardent supporter of cryptocurrencies and has even proclaimed that they would be interested in formulating cryptocurrency of their own. The move was a preemptive measure to catch up with the developments in the fintech sector and also bank on the advantages of cryptocurrencies in modern Financial services domain. However, EU has decided to take some harsh steps to combat terrorism which includes banning of transactions greater a particular value that is subjective to the country. This way they would be able to ensure that terrorism funding is put on hold as they would be able to track online transactions.

This has eventually led us to the point where EU has started considering possible ways to regulate Bitcoin transactions. The plot thickens as this would mean identifying Bitcoin users, tracking transactions and doing away with anonymity. Let’s look into the details of how EU is planning to pursue the project:

The twist in the story:

The European Commission published the directive to monitor transactions and promote cashless transactions last July. The proposal has come up for review and the parliament had two options:

  1. To accept and approve the proposal
  2. To push for amendments that would fit the case better

In an interesting turn of events, the parliament went for an amendment to include Bitcoin and cryptocurrency wallets in the purview of the directive.

Regulating Digital Currency Businesses:


This move would mean the focus would shift on Bitcoin and cryptocurrency wallet companies and would essentially require the commission to monitor the transactions at the expense of anonymity. This was evident from the parliament’s quote about their decision:

“Terrorist groups are thus able to transfer money into the Union’s financial system or within virtual currency networks by concealing transfers or by benefiting from a certain degree of anonymity on those platforms”

However the positive aspect of the entire exchange was that the parliament is cognizant how regulations would affect the cryptocurrencies and are prepared to take a balanced approach towards the digital asset class.

Ending anonymity:


After the Paris attacks in 2015 and incidents where the assailant demanded the ransom in Bitcoin, EU government has become very proactive in monitoring illicit activities that are facilitated through Bitcoin. Following the survellaince,  Europol released a report in which it explicitly stated that there was no evidence found linking terrorist activities to Bitcoin financing. Nonetheless, EU is clearly bent on tracking assets through cryptocurrency and end the privilege of anonymity that the currencies offer. Growing acts of terrorism have been given as a prime reason for the decision.

Global investors watch out for Italian referendum, Bitcoin to get the push?

The European region has always been a major Bitcoin market mover in times of economic or political crisis. This is evident from what happened with Brexit this year. The pre-Brexit tension and the post-Brexit shocks caused turbulent economic times for European residents. The Brexit from EU caused Bitcoin prices to spike up considerably and make it the safe haven against the adverse market reactions. December 4th can witness a similar push in Bitcoin prices as EU will witness Italian referendum. While market is waiting to for what might happen, let’s look into the dynamics of the referendum:

Italian Referendum:


On December 4th, the global markets should be prepared for an economic tremor as Italy prepares for a referendum. The Italian citizens would vote on changing resolutions to amend constitutions. This also involves absolving the power given to State, Parliament and Bureaucrats. The sale of Italian government bonds and securities has been on the rise anticipating the crisis.  Italy currently has eight troubled banks currently that tank if the referendum doesn’t turn out in favor. Adding to the tension, Prime minister Matteo Renzi declared that he will quit if people vote against the resolution.

Impending market chaos:


The aftermath of the controversial referendum can be disastrous as Italy is one of EU’s biggest debtors. Owing to bad lending practices, the country’s borrowing has led to financial instability as many banks are under heavy pressure now.

Financial Times reporter Rachel Sanderson stated,

“Italy’s banks have €360bn of problem loans versus €225bn of equity on their books after successive regulators and governments failed to tackle a bloated financial system where profitability was weakened by a stagnant economy and exacerbated by fraudulent lending at several institutions.”

How the markets will react to this would surely be of interest for all global investors.

How Bitcoin will react:


If the Italian referendum goes sour, it could mean investors could turn to possible uncorrelated assets such as bitcoin and Gold. Just before the Brexit vote, Bitcoin spiked to $675. As soon as the decision became public, global stock markets began to plunge. However, gold and bitcoin values went up significantly as investors turned to safer hedges. Just one week before the vote took place, the San Francisco-based exchange Coinbase saw a 55% rise in British registrants. After the vote was out, it was noted that a 350% increase in UK sales of Bitcoin. Even during the fears of possible ‘Grexit’- Greece Exit, there was good increase of volumes of Bitcoin. Basing on these historical observations, it is very possible that we might see something similar during the referendum.