The Anti Money Laundering Regulation of Crypto-assets in Europe: A Critical Analysis

The present analysis will explore how the legislator has responded to the introduction of blockchain technology and crypto-assets. As we will detail, blockchain introduces a new architecture for digital exchanges of value. One that substitutes the central intermediary with a decentralized network of cooperating nodes. By reshaping the architecture of digital exchange systems, blockchain undermines the fundamental premise underlying the preventive prong of the anti-money laundering policy strategy: the necessary intermediation of digital exchanges of value. The primary aim of the present research is to critically examine the impact of crypto-assets and blockchain on the financial monitoring infrastructure and the connected policy responses. Due to the disruptive nature of blockchain’s transaction model, this is a field that has known a great degree of innovation, particularly in Europe. The present decade will be fundamental in the definition of a European policy strategy for crypto-assets. The introduction of the Market in Crypto-asset Regulation (MiCaR) – the first comprehensive regulation of crypto-assets worldwide – and the upcoming Anti-money Laundering Package will shape how the Union approaches crypto-assets and its ability to reap their benefits while mitigating the risks. However, the present research also has a second, larger, purpose. Digitalization is altering the physiognomy of the world and human action. Rules that have been regarded as essential to human existence for centuries are now called into question. For instance, digital interaction systems allow continuous non-local exchanges freeing humans from their corporeal boundaries, artificial intelligence promises to create non-human autonomous decision makers. Within this changing architecture, the validity of legal tenets developed across eras is challenged forcing the legislator to reimagine its strategies in an unprecedented fashion. Taking anti-money laundering as a case study, the blockchain, by introducing the possibility to exchange value digitally in the absence of an intermediary, challenges the previous intermediary-based legislative strategy.5 The text will analyse how, and if, the policy maker has adapted to this new playing field. The perspective of the text is that a simple reiteration of pre-existing models is not adequate in the presence of fundamental architectural modifications. The legislator cannot simply stick to an “everything changes, nothing changes” approach. Rather, it should proactively engage with such architectures and imagine new solutions rooted in them. The ability to reinvent its strategy, and even its fundamental tenets, is key for the law to survive in a world that is changing in such a profound manner. It is with this double perspective that we invite the reader to approach the present analysis.