Introduction
Nestled in the vibrant heart of Berlin, Maria, the owner of a popular café, stands at a crossroads. Her dedicated clientele, a mix of old friends and new faces, increasingly requests to settle their bills for lattes and croissants with cryptocurrencies. Maria senses that by embracing this digital shift, she might not only draw in a tech-savvy crowd but also streamline her business operations. Although Maria is aware of the headaches that accompany such a transition, she feels the benefits it brings are worth it.
Across Europe, the buzz around cryptocurrencies is undeniable, with a staggering 73% of the population expressing optimism about its future. Business owners like Maria find themselves wrestling with pivotal questions: How does one ensure their café remains compliant under the EU’s stringent new crypto regulations? What are the risks of non-compliance? Is there a way to innovate without inadvertently stepping into a legal quagmire?
What’s up with the crypto compliance in the EU
In October 2018, the European Union rolled out a new set of rules called the Sixth Anti-Money Laundering Directive (6AMLD), which came into effect in June 2021. This directive builds on the previous rules but introduces stricter definitions of what counts as money laundering, including helping, encouraging, or trying to commit such acts. 6AMLD aims to emphasize stricter checks on who owns companies and to ensure more accurate and timely exchange of financial information. It lays out specific criminal activities considered as money laundering, such as drug trafficking and cybercrime, to help stop these profits from being cleaned through the financial system.
Moreover, 6AMLD extends to cover a wider array of transactions and entities, including crypto services, requiring them to perform detailed background checks on transactions over a certain amount. These changes show a proactive approach, using advanced technology to keep up with criminals and prevent money laundering across Europe.
Since then, crypto businesses across the EU must comply with anti-money laundering and countering the financing of terrorism (AML/CFT) rules. These rules are backed up by the enhanced scrutiny from local institutions.
The examples of such regulators are the Lithuanian Ministry of Finance, MFSA in Malta, BaFin in Germany and Autorité des marchés financiers in France, as well as many other local regulators. If you are looking towards focusing on crypto as an EU-based business, such regulators will become your closest allies.
Additionally, The European Union has taken significant steps towards regulating the crypto market, most notably through the Markets in Crypto Assets (MiCA) regulation,which is to be implemented step by step. The current regulatory landscape governing the crypto-asset sector is highly fragmented across the EU. Some of the Member States have already implemented MiCA’s framework, while others still focus on the national guidelines to regulate crypto-assets and related products or services. MiCA’s aims are to minimize market abuse and insider trading, establishing the EU as a pioneer in all-encompassing crypto regulation.
For small and medium enterprises (SMEs), this translates to obtaining authorization from national financial authorities and ensuring all crypto offerings are backed by transparent white papers. The ripple effects of MiCA will be profoundly felt across the realm of stablecoins, mandating rigorous measures to uphold their stability and reliability. Recent insights from Reuters highlight that these regulations will necessitate meticulous risk assessments and ongoing supervision, marking a significant pivot towards transparency and consumer protection.
On the Practical Side
Here is what you have to do to stay compliant as an EU-based business owner:
- Get authorized: Businesses will need approval from national regulators, adhering to stringent standards.
- Be flexible: With crypto becoming a recognised asset, you will need to find a way to deal with both crypto and fiat transactions all in one.
- Invest into compliance: SMEs must comply with rigorous anti-money laundering protocols and measures to counter the financing of terrorism.
- Stay transparent: Clear communication with customers about the risks and costs associated with crypto transactions is mandatory.
- Focus on cybersecurity: Even smaller businesses will need to invest into protecting their consumers as well as themselves from fraud and financial losses.
- Trust the process: Regulations concerning stablecoins are aimed at ensuring they possess adequate backing to maintain stability, even in volatile markets.
EU countries embracing the new reality
Crypto adoption really varies across the EU. Slovenia is leading the charge with 18% of its population invested in crypto, with Malta, Cyprus and Luxembourg not far behind. Despite this, in other EU countries, the numbers are quite modest. Yet, the general sentiment about crypto in Europe is super positive, with big institutions starting to embrace it.
Despite facing similar issues, EU-countries are far from being unanimous in regulating the crypto market. Some countries, such as the Netherlands have adhered strictly to 6AMLD’s requirement to cover only fiat-to-crypto exchanges and custodial wallet providers.
Others, such as the UK, Germany, and Finland, have pursued more expansive frameworks that cover other types of service providers - such as token issuers, crypto-to-crypto exchange platforms, crypto ATMs, peer-to-peer exchange platforms, among others.
An investor looking for a solid place with clear crypto rules should check out Malta. They’ve laid down some comprehensive laws that manage the use and exchange of digital currencies, which include the Virtual Financial Assets Act and other related legislation. This proactive approach has positioned Malta as a "Blockchain Island," attracting a significant number of crypto enterprises.
But should I use crypto after all?
To comply successfully, businesses need to understand the specific risks they face. Any EU-based SME owners will have to conduct a risk assessment that provides answers to questions such as:
- What is the nature of financial crime typologies your business encounters in each EU country where it operates?
- Who are your customers in each EU country where you operate, and what risks do they pose?
- Do your product and service offerings differ in each EU country where you operate, and what does this mean for your business?
The bottom line is introducing cryptocurrency payments alongside traditional fiat options is troublesome and poses potential risks. But what are the pay-offs?
- Reduced international transaction costs, which is perfect for SMEs doing cross-border business without additional fees or delays.
- New markets. Crypto payments make it easier to tap into global markets, especially in places where banking isn’t as developed.
- Outreach growth. Crypto may provide access to new demographics, which often represents a more cutting-edge and tech-savvy clientele with disposable income for luxury goods and services.
Optionally, Blockchain tech can streamline various business processes, reducing the need for middlemen and slashing administrative costs. For example, programmable money can enable real-time and accurate revenue-sharing while enhancing transparency to facilitate back-office reconciliation. This is, of course not for everyone, but if you are ready to embrace the brave new world reality, go for it!
At Blackcatcard, everything you need for managing your cryptocurrencies is at your fingertips. Our offering includes seamless crypto services through partnership with Manerio UAB. For an SME owner, these will be a single online banking solution needed for crypto operations.
Think of it this way: one app where you can effortlessly handle both fiat and digital currencies. With Manerio UAB as our trusted partner, you get access to legit crypto exchange and secure custodial wallets, all backed by strict adherence to international anti-money laundering standards and thorough KYC protocols. With Blackcatcard you will not worry about meeting the mentioned-above requirements for crypto operations, as it’s already met for you. You can receive payments from customers in crypto upon regular invoices where you can state your Blackcatcard wallet’s crypto address, pay your suppliers in crypto and not to forget completely legitimately sell and buy crypto for euros using the licensed crypto broker, so your accountants can include such transactions into the balance and cash flow sheets.
Interested in simpler ways to manage both fiat and crypto? Contact us to learn more about what Blackcatcard can do for you. Let’s make your financial management straightforward and secure.
Let’s wrap up!
As the digital landscape evolves, SMEs throughout the EU are increasingly recognizing the strategic benefits of embracing cryptocurrency. Compliance with the upcoming MiCA regulation not only ensures legal adherence but also positions businesses at the cutting edge of innovation, ready to leverage the myriad benefits that crypto offers—from reduced transaction costs to expanded market access.
Considering integrating crypto into your business strategy? Let’s connect! Embrace the future with us and transform the complexities of crypto compliance
