The growth in cryptocurrency and its challenge to EU anti-money laundering legislation

Abstract

The increase in money laundering across the EU in recent years raises the question of whether enough is truly being done to combat such crimes. With the prominence of cryptocurrencies nowadays, as well as the emphasis on data protection and user privacy, it can be said that money laundering has increased significantly. This dissertation aims to thoroughly analyse the EU’s attempts in combatting money laundering through the use of cryptocurrencies. In doing so, it will discuss the regulatory frameworks, directives, and various initiatives introduced at an EU level throughout recent years. This dissertation will delve into key differences in implementation and enforcement of these measures among EU Member States and identify reasons for large discrepancies in cryptocurrency money laundering mitigation. Through this research, I will highlight persisting challenges, and specific areas requiring further attention within the EU’s anti-money laundering framework with regard to cryptocurrencies. This research is primarily based on an inductive approach in order to analyse patterns and consistencies among Member States and successfully determine specific measures which have been more effective at targeting cryptocurrency money laundering. This is further supported through a mixed-methods approach using both qualitative and quantitative data including factual information, statistics, and percentages, amongst others, in order to provide a complete understanding of past, current, and possible future outcomes in this regard. Furthermore, this dissertation compiles various secondary sources including journal articles and news reports as well as a number of primary sources such as statistics, quotations from speeches and interviews, and official government documents. In order to fulfil the aims and objectives of this dissertation, I have made use of both the comparative and the cross-sectional research designs. The comparative research design has allowed me to examine and contrast how Member States have implemented and enforced EU measures in relation to cryptocurrency money laundering, with the possibility of identifying strengths, weaknesses, and shortcomings. On the other hand, the cross-sectional research method was used to determine the impact of these measures on individual Member States. Since legislative measures must be implemented by a set deadline, this research design has been useful in examining results of different countries which have implemented the same framework within the same time period. This dissertation sheds light on the persisting challenges brought forward by rapidly evolving technologies, especially those in relation to the financial sector such as cryptocurrencies. Misuse and illicit activities in such areas can greatly affect a country’s financial system, therefore, it is crucial to ensure compliance and implement rigorous surveillance of asset providers in order to centre EU measures on prevention. Additionally, this research highlights gaps in enforcement and compliance, even within Member States with elaborate frameworks and infrastructures. This continues to suggest that the practicality and ultimate effectiveness of EU measures with regard to cryptocurrency regulation and the prevention of cryptocurrency money laundering is not as impactful as initially planned. Finally, the dissertation serves as a basis for future research on the topic, especially since additional EU measures which are more comprehensive and target cryptocurrency money laundering are yet to be implemented.