Cryptocurrencies and Money Laundering, the Position of the European Union

According to recent data provided by the European Union Agency for Police Cooperation (Europol), during the year 2021, the use of so-called cryptocurrencies, for the purpose of money laundering, has increased by 30%.

Javier Edwards

In our country, where crime and activities associated with drug trafficking have skyrocketed, this is an issue that should be among the priorities of the financial authorities: the Treasury, the Central Bank of Chile and the Commission for the Financial Market.

Contrary to what happens in Chile and most of the countries in the region, in Europe, since 1991 up to five Directives have been issued by the European Commission with the aim of increasing control mechanisms, enhancing supervisory powers and toughening sanctions in this matter. In other words, seeking to prevent instead of reacting late, the EU has launched an ambitious action plan against money laundering, within which, the control of crypto assets occupies an important place.

Money laundering has shown for decades its ability to evade prohibitions, generating significant setbacks in the control of one of the main activities through which crime and terrorism generate their own money market and creates the source to fund their criminal industry. Thus, to the traditional difficulties, with the irruption of crypto actives, new challenges to the financial authorities are added exponentially. Deregulated, decentralized, with maximum liquidity and ubiquity, cryptocurrencies -without adequate regulation- can become the perfect paradise for money laundering and illicit financing of activities of the same nature.

The cryptocurrency market has had a meteoric growth, whose total capitalization, according to certain estimates, could have reached its historical maximum last November 2021 with 2.6 billion euros.

Unlike what usually happens in legal matters, that is, the law usually responds in a reactive way to the new realities that are appearing, given the worrying reality of money laundering via cryptocurrencies and blockchain technology, in the developed countries, there seems to be a clear awareness of the need to be proactive and anticipate the potential risks associated with these operations.

The already mentioned European plan, looks for setting the foundations for a legal framework aimed at reinforcing the security, in legal terms, of operations with crypto actives as well as that of the people who acquire them. This proposal is called MiCA (Markets in Crypto-Assets), which should be enshrined in an EU Regulation that reflects the need for a new right for a supervening and highly dynamic technological scenario. Likewise, the creation of a European Anti-Money Laundering Authority (AMLA) is contemplated, entity which will be in charge of supervising operations in these crypto instruments throughout the EU and will seek to ensure cooperation between all Authorities. of Financial Information of the Member States of the EU.

In this scenario, it becomes imperative that both in Chile and the rest of the countries in the region we adopt a similar attitude and make the decision to regulate preventively instead of waiting for the lack of control and massive irruption of this type of operation to have an adverse material impact on our economy, its financial system and also the further increase in financial crime.