European Union (EU) lawmakers have taken decisive action to bolster efforts to tackle sanctions violations, including those involving cryptocurrencies.
The new rules tighten the EU’s stance on digital assets, particularly cryptocurrencies, highlighting the urgent need for a unified approach with standardized definitions and penalties for violations.
EU Parliament Bolsters Sanctions, Tightens Grip on Crypto with New Rules
On Tuesday, Members of the European Parliament (MEPs) voted to implement stringent new laws to curb violations related to travel bans, arms embargoes, sectoral restrictions, and asset freezes, focusing on crypto-assets and wallets.
The adopted text of the new rules expands the scope of EU restrictive measures to encompass a wide range of financial services, explicitly including the provision of “crypto-assets and wallets.” Sanctions can entail the freezing of assets, including those held in cryptocurrencies.
Highlighting the critical provisions of the legislation, a press release stated,
“The new law sets consistent definitions for violations, including not freezing funds, not respecting travel bans or arms embargoes, transferring funds to persons subject to sanctions, or doing business with state-owned entities of countries under sanction.”
However, despite sanctions being established at the EU level, enforcement remains the responsibility of individual member states, leading to inconsistencies in definitions and penalties across jurisdictions.
In addition, the directive broadens the scope of punitive actions to cover deliberate infringements and instances of negligent trading in arms or dual-use items. To standardize enforcement procedures across EU member states, the initiative seeks to establish uniform and rigorous penalties for breaches of EU sanctions, thereby enhancing the effectiveness of the EU’s sanctions framework.
Parliamentarians representing the 27 European Union member states overwhelmingly supported the new rules, with 543 votes in favor, 45 against, and 27 abstentions. The impetus for these regulations stems from fears that EU financial sanctions against Russia were being circumvented.
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The move comes amid growing concerns over diverging national approaches within the EU, which have led to weaknesses and loopholes in enforcing sanctions. This was mainly in the wake of Russia’s invasion of Ukraine. The European Parliament has endorsed a comprehensive set of regulations aimed at cracking down on such infractions, including those involving cryptocurrencies.
Dutch lawmaker Sophie in ’t Veld, tasked with guiding the legislation through Parliament, emphasized the necessity of the new rules, stating,
“We need this legislation because diverging national approaches have created weaknesses and loopholes, and it will allow for frozen assets to be confiscated.”
The enforcement of sanctions within the EU has historically been decentralized, with individual member states responsible for implementation. This decentralized approach has resulted in inconsistencies in definitions of sanction violations and associated penalties across different countries.
The newly approved directive introduces stricter penalties for individuals guilty of violating or circumventing sanctions. Under the new laws, such transgressions will constitute criminal offenses punishable by prison sentences of up to five years across all 27 member states.
However, before the legislation can take effect, it must receive approval from the Council, which consists of top government officials from member states. Once greenlighted by the Council, the new regulations will bolster the EU’s ability to enforce sanctions effectively and curb illicit financial activities, including those involving cryptocurrencies.