How the changes will affect investor due diligence
On June 29, 2022, the President of the European Council and the European Parliament agreed on changes to the anti-money laundering legislation - legislation on anti‑money laundering, or AML.
It is planned to add rules to the legislation that will ensure financial transparency in the exchange of crypto assets. The European Union will oblige cryptocurrency service providers to collect and, upon request, provide information about the sender and beneficiary of transfers.
The sender information will move along with the transfer of cryptocurrency, regardless of the number of transactions.
Crypto asset service providers will also need to put in place internal policies, procedures and controls to mitigate the risks of user evasion from sanctions imposed by the European Union.
Changes in anti-money laundering legislation will also affect the verification of applicants for investment programs.
About 15% of investors are interested in participation in residence permit programs or citizenship with assets in cryptocurrency. Some programs, as an exception, take into consideration such assets.
To pass Due Diligence, you need to show how and with what money the investor bought the cryptocurrency, to whom, how and for how much he sold, whether he paid taxes. The difficulty is to document this.
The new legislation will expand the opportunities for investors. It will be easier for a program participant to prove the legality of assets during verification, as the European Union will begin to control cryptocurrency service providers.
Immigrant Invest is already implementing processes for verifying assets in cryptocurrency in the company’s Due Diligence.
Consultant, Compliance Anti Money Laundering Officer
How the European Union plans to regulate the cryptocurrency market
The European Union developed a draft regulation on the regulation of the cryptocurrency market, or MiCA, back in September 2020. Its main goal is to create a single legal field for the use of cryptocurrencies in the European Union. It will not duplicate the provisions of the AML legislation.
The authors of the project emphasize that the regulation should make the financial sector of the cryptocurrency market transparent at the legislative level. MiCA will protect investors and keep their money from scammers.
On 30 June 2022, the President of the Council and the European Parliament provisionally agreed on the provisions of the regulation.
Under the new rules, cryptocurrency service providers will be required to:
- obtain a license to operate in the European Union;
- comply with the requirements for protecting investors' wallets;
- bear responsibility in case of loss of cryptocurrencies by the user;
- publish reports and make them available to investors and the EU.
The European Council noted that it will not create separate rules for data protection when transferring cryptocurrencies. They will be governed by the EU General Data Protection Regulation.
Cryptocurrency providers will also have to declare information about the impact of their activities on the environment and climate. ESMA - European Securities and Markets Authority - will develop bills on major adverse environmental and climate impacts.
Then, within two years, the European Commission will have to provide a report on the impact of the cryptocurrency market on the environment and introduce minimum sustainability standards.
The European Banking Authority and the European Central Bank will be authorized to audit companies if they doubt the legality of their actions. Under MiCA rules, the European Bank will also be required to maintain a public register of cryptocurrency providers that do not comply with the law.
The MiCA law is expected to come into force at the end of 2023.
Is it possible to get a residence permit or citizenship for cryptocurrency?
So far, it is impossible to obtain a residence permit or citizenship of another country directly for investments in cryptocurrencies. First, investors sell coins, then transfer money to a bank account and prove their legality.
The Vanuatu government has allowed the storage and use of digital assets in the country. Local and international companies with a license from the Vanuatu Financial Services Commission will be able to manage assets. But payments under the citizenship program cannot be made directly: the investor first sells the cryptocurrency, and the participation is paid in US dollars.
Antigua and Barbuda also planned to introduce payments in cryptocurrency to pay for investments. As of July 2022, it is not possible to pay for investments in cryptocurrency. With their help, the applicant will only be able to confirm that he has enough money to participate and they are earned legally.
Several times, news appeared in the media about the intention of other countries to add the possibility of obtaining citizenship for cryptocurrencies. But all of them turned out to be just rumors or fakes.
Immigrant Invest is a licensed agent that helps investors obtain a residence permit or a second citizenship in Europe and the Caribbean. If you want to get a second passport or a residence permit, please contact investment program experts for advice.