Cryptocurrencies in the legal labyrinth: between technological revolution and financial crime

As a lawyer who follows the development of digital markets, I have witnessed cryptocurrencies become a “monstrous topic” that tests the limits of existing legislation. While the technology offers remarkable opportunities, regulators around the world, including those in the EU, are increasingly concerned about the misuse of virtual currencies for illegal purposes.

The legal framework: the problem of anonymity

The main challenge we in the legal profession recognise is anonymity, which ranges from full anonymity to pseudo-anonymity. It is precisely this lack of transparency that prevents adequate tracking of transactions and allows them to take place outside the regulatory perimeter, making it easier for criminal organisations to access “clean money”.

The European legal framework is changing to meet these challenges. The Fifth Anti-Money Laundering Directive (AMLD5) introduces key changes:

Definition of virtual currencies: an official definition is introduced that covers cryptocurrencies.

Obligations for platforms: providers of exchange services between virtual and fiat currencies and custodian wallet providers are now obliged to verify their customers and report suspicious transactions.

Cryptocurrencies and taxes: invisible assets

Tax evasion is another key battlefield. When the tax authority does not know who is taking part in a transaction, it can neither tax it nor sanction evasion. Although cryptocurrencies are by nature “intangible movable property” and as such are subject to the rules on freezing and confiscation, their nature makes them extremely difficult to locate.

When the tax authority does not know who is taking part in a transaction, it can neither tax it nor sanction evasion.

Slaviša Cincarević

The “blind spots” of regulation

Despite progress, regulation such as AMLD5 still has “blind spots”. Currently outside its reach are:

Miners: those who process transactions often remain outside supervision, even though mining can be used for money laundering.

Providers of software and hardware wallets: if they do not hold their clients' keys (non-custodial), they escape strict control.

Coin offerors: which opens room for abuse at the early stage of new cryptocurrencies.

Technology is not the enemy: the difference between cryptocurrencies and blockchain

As lawyers, we must be careful not to “throw the baby out with the bathwater”. Blockchain is merely the technology on which cryptocurrencies run. It has numerous lawful applications, from land registries and healthcare to share registration. Restrictive measures should therefore target illegal uses of cryptocurrencies, not the technology itself, which can benefit the legitimate economy.

Conclusion and recommendations

If you are an investor or a user of crypto services, you must understand that digital assets are no longer the “Wild West”. The trend is clear: it is moving towards mandatory user registration and international cooperation (such as G20 initiatives) in order to curb financial crime.

Legal certainty in this field is still being built, and understanding these rules is essential to avoid unintended legal consequences, especially in the areas of tax obligations and compliance with anti-money laundering rules.

This text expresses the author's professional opinion and does not constitute legal advice for a specific case.