European Parliament’s TAX3 Crypto Report: ‘Unveil the Anonymity’
The European Parliament’s Special Committee on Financial Crimes, Tax Evasion, and Tax Avoidance, more simply referred to as the TAX3, has published a report it requisitioned on financial crime considerations pertaining to cryptocurrency. The paper makes a series of policy recommendations emphasizing de-anonymization of crypto users in the European Union’s nook of the cryptoverse.
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What Is the TAX3 Report?
TAX3, a tax-centric investigatory body that was provisionally voted on in February 2018 and then officially enacted by the European Parliament on March 1st, 2018, has released its first requested report on the legal implications of possible financial crimes via cryptocurrency.
The 103-page July paper, entitled “Cryptocurrencies and blockchain: Legal context and implications for financial crime, money laundering and tax evasion,” was authored by Prof.dr. Robby Houben and Alexander Snyers, both hailing from the University of Antwerp’s “Business & Law” research group.
In the report’s abstract, the co-authors introduce their focus and hail their resulting “policy recommendations” for the wider EU:
“More and more regulators are worrying about criminals who are increasingly using cryptocurrencies for illegitimate activities like money laundering, terrorist financing and tax evasion. The problem is significant: even though the full scale of misuse of virtual currencies is unknown, its market value has been reported to exceed EUR 7 billion worldwide. This paper prepared by Policy Department A elaborates on this phenomenon from a legal perspective, focusing on the use of cryptocurrencies for financial crime, money laundering and tax evasion. It contains policy recommendations for future EU
Crypto De-Anonymization a Major Emphasis
In the context of standing and future EU financial law, the report’s authors arrived at a series of formal recommendations that are not binding themselves, but will serve as a basis for helping EP lawmakers arrive at their own legislative conclusions on crypto.
Notably, the co-authors recommended to TAX3 that, going forward, “mandatory registration” so as to “unveil the anonymity of cryptocurrency users” would be prudent in the EU.
Moreover, a “specific ban” on certain anonymization vectors was also recommended:
“Furthermore, the EU should think about imposing a specific ban on such aspects surrounding cryptocurrencies that are aimed at making it impossible to verify their users (e.g. mixers) and criminally sanctioning these aspects.”
Such language would seemingly put privacy coins like Monero and Zcash’s “shielded addresses” square in the crosshairs — a major thread to watch in Europe in the months ahead accordingly.
For now, it’s not clear how far these recommendations will go toward fruition. Nevertheless, they pose some striking considerations for European privacy backers — specifically for European privacy coin holders.
Toward the end of their report, the co-authors in question ask whether mechanisms like “the mixing process attached to Dash’s feature PrivateSend […] Monero’s RingCT, stealth addresses and Kovri-project” should be banned.
They answer in the affirmative, saying even if such a ban couldn’t literally stop transgressions, it would create a legal foundation through which to prosecute any offenders that are caught in the future:
“Whatever the answer may be, we must again avoid being naive: even if a ban would be imposed, how do we detect a breach, given that the purpose of the object of the ban just is to obscure identities? Nevertheless, it would be worthwhile to consider introducing a ban. If authorities then bump into the prohibited activities, they have a legal basis for prosecution, insofar not yet available. Possibly, imposing a ban could also have a deterrent effect.”
Of course, “Ambition must be made to counteract ambition,” as James Madison put it, and to that end privacy proponents have wasted no time in sounding off against the more draconian aspects of the paper.
Among that lot was Sarah Jamie Lewis, the Executive Director of research non-profit Open Privacy, who blasted the ban rhetoric on Twitter.
"Should we consider banning Ring Signatures?" is perhaps my favorite genre of cop thought. pic.twitter.com/l1uZOYtCSy
— Sarah Jamie Lewis (@SarahJamieLewis) July 19, 2018
Needless to say, the researcher and a whole throng of privacy advocates will refuse to go gently into that good night in the face of the new TAX3 report.
"But why do you *need* that much anonymity though?" says the cop seriously considering banning mathematics.
— Sarah Jamie Lewis (@SarahJamieLewis) July 19, 2018
Whatever ends up happening, the waters ahead are increasingly looking to be choppy.
“Investigations like TAX3 could lead to a lasting split in cryptocurrency markets,” Cornell University professor and crypto pundit Emin Gün Sirer noted earlier this year. “Exchanges [will] face the choice of whether to comply with mounting regulatory demands.”
Alas, where the TAX3 takes their newfound recommendations from here could have massive implications for EU crypto users and beyond, particularly if other nations or regions look to the EU’s framework as a model in the future.
What’s your take? Should privacy coin projects be concerned? Or not really? Let us know what you think in the comments below.
Images via TAX3, Pixabay