Deribit, a crypto derivatives exchange based in Europe, recently announced that it was leaving Europe due to regulatory pressure. According to the announcement, the planned EU regulations, which are based on FATF guidelines, would force crypto exchanges to carry out extensive surveillance on their users.
Moving to Panama
The crypto currency exchange will move its operations to Panama from the Netherlands starting on February 10, 2020. They are not the only exchange that has been forced to leave Europe due to regulation. Various other crypto exchanges have shut down their operations because they opposed the increased surveillance measures put in place by the EU on the crypto industries. These businesses believe that this is a violation of privacy rights and they would rather shut down or move than collect so much data on their users.
Upcoming EU Regulation
Besides increased privacy invasion, the planned 5AMLD regulation would greatly increase the barrier to entry for exchange users. The result is that most of the existing users of Deribit might not be able to comply with the new rules. Additionally, it would come at an increased cost for the exchange. The result is that the exchange would make less money while also seeing their costs go up. Besides changing the location of the exchange, not much else will change. The leadership team and the staff working for the exchange will remain the same.
What Else will Change?
Starting on February 10, all of the exchange’s operations will be transferred to DRP Panama Inc., a legal entity registered in Panama. The result is that all holdings, equity, open client positions, fees, trade history, wallets, portfolio margin arrangements, and various other system settings will be in the control of the entity registered in Panama. Besides that, they plan to move the hardware for their servers to London. However, users of the exchange might not even notice the difference in the UI.
Thus far, companies operating in the crypto sector have been leaving the EU in droves. The new AML requirements are too strict and they seem to have been designed to stifle the growth of the crypto sector. Only small startups have pulled out so far.
However, major exchanges such as OKEx and Binance might soon have to stop all their operations in the EU soon.
According to the EU, the rules are being implemented to prevent terror financing, in the face of increased terror activity globally. Besides that, the EU is trying to prevent money laundering by drug dealers and other nefarious activities engaged in activities such as human trafficking.
Will this Change?
It is unlikely that the EU will change its stance on the crypto sector anytime soon. Thus far, the sector has proven hard if not impossible to regulate, which has left regulators frustrated. This is especially so when it comes to privacy coins. Various regulators have admitted they are not able to track down privacy coins due to how they are designed. Despite these challenges, it is worth pointing out that all financial crimes before the invention of crypto were conducted using fiat currencies.