Cryptocurrency Regulation in the EU AML Regime: the path towards effective harmonization?

The harmonisation of Anti-Money Laundering (AML) law, at EU level, has been motivated by the need to disrupt transnational organised crime. Cryptocurrencies present a complex challenge to AML policies, given the networked and cross-border nature of the transactions through which they are exchanged. Since the creation of Bitcoin in 2008, scholarly discussions contended the applicability of both the Third and the Fourth AML Directives to Cryptocurrency transactions. In 2018, an attempt was made by the EU to harmonise AML law targeting Cryptocurrencies through the enactment of the Fifth AML Directive. However, as it becomes evident from the current legal scholarship on this matter, the Fifth AML Directive has several shortcomings which undermine its potential to effectively harmonise AML measures targeting Cryptocurrencies, thereby creating a gap between the national implementing legislations that causes asymmetrical harmonisation. Thus, this paper argues that a revision of the Fifth AML Directive is necessary to prevent further asymmetrical harmonisation of AML legislation targeting Cryptocurrencies. I untangle the constructions undertaken as attempts towards the legal characterisation of Cryptocurrencies under both the Third and the Fourth AML Directives, in an attempt to outline the context of the legal environment in which the enactment of Fifth AML Directive took place. Then, I outline the shortcomings in the Fifth AML Directive’s effort to provide for the harmonisation of AML policies targeting Cryptocurrencies in the EU. The main issues raised are its ability to cover Initial Token Offerings, Initial Coin Offerings, crypto-to-crypto exchange services and Tumbler services. Afterwards, I analyse, from the perspective of Cryptocurrencies, the EU AML Regime’s limitations when it comes to enforcement and jurisdictional matters between EU Member States. Finally, I compare specific implementing measures of five EU Member States to verify whether there is, in fact, asymmetrical harmonisation of AML measures targeting Cryptocurrencies: Bulgaria, France, Germany, Italy and the UK. I conclude that delegating to Member States the responsibility for distributing AML compliance obligations among the relevant actors within the Cryptocurrency ecosystem reverses the goal of Directives to facilitate the law through harmonisation.