European AML Directive Pushes Crypto Startup Bottle Pay Out of Business
Bottle Pay, a cryptocurrency payments provider from the U.K., has announced its decision to cease operations by the end of the year. Despite attracting some serious funding and expanding its user base significantly in the past few months, the company has found it unacceptable to continue to work under the upcoming EU regulations. AMLD5, the latest update of the EU’s anti-money laundering policy, introduces stringent requirements for crypto businesses.
Bottle Pay Shuts Down Because of New KYC Rules
As a custodial crypto wallet provider based in the United Kingdom, Bottle Pay will be obliged to comply with stricter regulations to be introduced with the Fifth Anti-Money Laundering Directive of the European Union. AMLD5 comes into effect January 2020 and has to be transposed into national law by all EU member states. It expands the coverage of the relevant legislation to include the crypto space imposing extensive KYC and AML practices.
“After having built a fantastic community around our service, and seeing huge growth in user numbers over the last few months,” the British company remarked in a blog post published on Friday, “it is with heavy hearts that we announce Bottle Pay will cease operating on Tuesday 31st December 2019 at 13:00 GMT,” the announcement details.
Bottle Pay shuts down after raising $2 million in seed funding this past September. The startup, which was launched in June, developed a tipping service that allowed users to send small amounts of cryptocurrency on social media networks and messengers through its browser extension for Chrome, Firefox and Brave.
A recipient’s social media account or a handle was all the sender needed to transfer the digital cash. Bottle Pay was available on multiple platforms including Telegram, Twitter, Instagram, Github, Discord, and Reddit. Money sent to users of these networks will now be returned to the sender within a week. Active users have to withdraw their funds by Dec. 31 and new subscriptions will not be accepted as signups and deposits went offline this week.
In the blog post, Bottle Pay further emphasizes that “the amount and type of extra personal information we would be required to collect from our users would alter the current user experience so radically, and so negatively, that we are not willing to force this onto our community.” The company wants to maintain its integrity as a service provider and protect the interests of its team, investors and users. “We have taken the painful decision to shut Bottle Pay down completely rather than become subject to these new regulations,” the startup concludes.
What’s Special About AMLD5
The European Union regularly updates its anti-money laundering and counter-terrorist financing framework. AMLD5 is its latest edition. The directive was adopted and published in 2018 and will come into force on Jan. 10, 2020. One of its key features is the expansion of its scope to encompass crypto activities within the EU.
AMLD5 addresses regulatory challenges related to high value goods, prepaid cards, high-risk countries, and politically exposed persons as well as the legal treatment of virtual currencies. It introduces a legal definition of cryptocurrency which has been described as “a digital representation of value that can be digitally transferred, stored or traded and is accepted as a medium of exchange.”
Providers of crypto-related services, such as exchanges and custodial wallets, are considered “obliged entities” and will have to comply with the union’s AML regulations in the future. That means abiding by the rules applicable to other financial institutions including the obligation to perform customer due diligence and submit suspicious activity reports. That also applies to investment firms, tax advisors, accountants, notaries, and lawyers who transfer or receive payments equivalent to €10,000 and more.
Crypto companies will have to register with the respective authorities in their jurisdictions such as Bafin in Germany or Britain’s FCA. What’s more, the financial intelligence units of member states have been authorized to obtain the private data of virtual currency owners and users, including their identities and addresses. The information will be kept in central registries and will allow the identification of both private individuals and corporate entities holding accounts with crypto platforms. Brussels’ main goal is to reduce anonymity associated with crypto transactions and use.
Do you expect more crypto businesses to close down due to AMLD5? Share your thoughts on the subject in the comments section below.
Images courtesy of Shutterstock.
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