EU Bitcoin Legislation

Kevin Helms at reports on developments at the European Parliament on Bitcoin legislation. This may be bad news.

A Committee Report on the proposal for revising the money laundering directive was published on March 9.

Authors of the document are the Committee on Economic and Monetary Affairs and the Committee on Civil Liberties, Justice and Home Affairs. The document consists of a draft European Parliament Legislative Resolution and various Committee opinions.

Especially the opinion of the Committee on Legal Affairs of January 18th contains some language that would require radical changes in the Bitcoin space, if adopted.

Amendment 5 proposed by that Committee wants to add the following to recital 6 (about entities currently not obliged under the Directive):

“issuers, administrators, intermediaries and distributors of virtual currencies, and administrators and providers of systems for online payments”.

Amendment 21 wants to add these entities to the list of those obliged under the new Directive. And amendment 60 wants to require a license or registration for such entities.

Who is the “issuer” of Bitcoin? Are miners who create new coins “issuers” under this proposal? If so, they would need to have a license or registration.

Who is the “administrator” of Bitcoin? Would that be contributors to the core Bitcoin client software development? Would they need to apply for a license or register in the EU?

Who are “intermediaries and distributors”? Again, would miners fall under that category as well? Would you need to apply for a license to run a full Bitcoin node?

Fortunately, this proposal is not reflected in the actual Draft Legislative Resolution. It may of course be adopted again later in the process, but for the moment, the above questions may not actually arise.

Another amendment proposed by the Committee on Legal Affairs would change the definition of virtual currencies. Amendment 26 would add one sentence to the definition of virtual currencies:

“Virtual currencies cannot be anonymous.”

I am not quite sure how to understand this. If any anonymous virtual currency (like Dash, which is built to be anonymous, and unlike Bitcoin, which is not) is excluded from the definition, that would seem to mean that any language on virtual currency, like the above licensing and registration requirements, would not apply because Dash is not a virtual currency under the Directive.

I doubt that that’s what the authors had in mind. They probably wanted to state somewhere that nobody should be allowed to build anonymous virtual currencies.

If so, adding this text at the definition would achieve the exact opposite of that goal.

Again, this proposal hasn’t made it into the Draft Legislative Resolution, though some other proposals of the Committee on Legal Affairs on the exact wording of the definition have made it into the final text.

So again, the resulting Directive may not yet make anonymous virtual currencies illegal in the EU. But this may happen at any time in the future, and some people involved in the process clearly want to make it happen already this time.

If so, something I wrote about black and white bitcoins a couple of years ago would become relevant in real life.