EU Parliament Approves Crypto-Inclusive Sanctions Law to Close Loopholes in All 27 Member States

The European Parliament has voted in favor of implementing new rules that extend to crypto assets in order to enhance the procedure of sanctions enforcement. The aim of this legislation is to standardize the application of sanctions across the European Union’s 27 member states, addressing existing disparities and closing loopholes that have affected the effectiveness of EU sanctions.

In an effort to eliminate inconsistencies that have hindered the EU’s ability to enforce sanctions effectively, the European Parliament passed a set of regulations on Tuesday to strengthen enforcement against sanctions breaches, including those involving cryptocurrencies. The measures received strong support from legislators, with 543 votes in favor, 45 against, and 27 abstentions. This legislative push was prompted by the invasion of Ukraine by Russia and concerns that the EU’s financial sanctions against Russia were being bypassed.

The initiative aims to address the patchwork of enforcement practices that currently exist due to the EU’s authority to adopt sanctions at the European level, while the responsibility for enforcing these sanctions falls on individual member states. This has resulted in significant variations in definitions of sanction violations and associated penalties. The inconsistent enforcement has not only made the sanctions less effective, but it has also created opportunities for entities to exploit loopholes, especially in crypto transactions and asset transfers. By introducing uniform definitions for violations and standardizing enforcement practices, the EU intends to strengthen its position against those attempting to evade sanctions.

This includes measures against freezing funds, violating travel bans, transferring funds to sanctioned individuals, or engaging in business with state-owned entities of countries under sanction.

In an effort to adapt to technological advancements and block avenues for sanction evasion, the EU has included crypto-assets in its sanctions regime. After receiving approval from the European Parliament, the legislation now awaits consent from the Council.

In January 2024, European Union officials tentatively agreed on elements of a comprehensive regulatory framework to combat money laundering, which will require every cryptocurrency firm to conduct customer due diligence. The Anti-Money Laundering Regulation (AMLR) represents a wide-ranging initiative to prevent sanctions evasion and money laundering, introducing a unified set of rules and establishing a supervisory body with oversight responsibilities for the cryptocurrency industry.

This demonstrates the EU government’s strong approach to regulating cryptocurrency usage. While cryptocurrency remains legal within the EU, authorities are taking steps to ensure that investors operate within a regulated framework and manage their assets with oversight to prevent illicit activities.