A new directive adopted by the European Union aims to shut down criminal financing by targeting the relative anonymity afforded by virtual currencies.

A new directive adopted by the General Affairs Council of the European Union on May 14, without discussion, is meant to prevent criminals from exploiting the relative anonymity of cryptocurrencies, without harming the broader functionality of existing and emerging payment systems.

The new directive amends directive 2015/849 as part of an Action Plan developed in 2016 to combat a wave of terrorist attacks in Europe.

The core arguments for amending EU 2015/849 are stated in the directive:

“The anonymity of virtual currencies allows their potential misuse for criminal purposes. The inclusion of providers engaged in exchange services between virtual currencies and fiat currencies and custodian wallet providers will not entirely address the issue of anonymity attached to virtual currency transactions, as a large part of the virtual currency environment will remain anonymous because users can also transact without such providers. To combat the risks related to the anonymity, national Financial Intelligence Units (FIUs) should be able to obtain information allowing them to associate virtual currency addresses to the identity of the owner of virtual currency. In addition, the possibility to allow users to self-declare to designated authorities on a voluntary basis should be further assessed.”

The main changes made to the preexisting directive 2015/849 include increasing the scope of access to information on beneficial ownership (a measure meant to improve transparency regarding the ownership of trusts and companies), diminishing risk associated with prepaid cards and virtual currencies, increasing the scope and quality of cooperation between the various financial intelligence units in Europe, and improving checks for transactions involving “high-risk third countries.”

“These new rules respond to the need for increased security in Europe by further removing the means available to terrorists”, said Vladislav Goranov, minister for finance of Bulgaria, which currently holds the Council presidency. “They will enable us to disrupt criminal networks without compromising fundamental rights and economic freedoms.”

This new action is in step with regulations passed by the EU in April meant to create “closer regulation of virtual currencies.”