For EU regulations, please visit EU Laws Related to Token Sales, Blockchain, and Digital Proof
So far, only one law, related to token sales, cryptocurrencies and blockchain was implemented: [Act No. 253/2008 Coll. from June 5, 2008 , on Selected Measures against Legitimisation of Proceeds of Crime and Financing of Terrorism (hereinafter referred to as the “AML Act”])(https://www.cnb.cz/miranda2/export/sites/www.cnb.cz/en/legislation/acts/download/act_253_2008.pdf)
The AML Act defines persons who are obliged to the identification and verification of the customer’s identity. Under the provision of Section 2 (1)l) of the AML Act, the person obliged is also the person providing services connected with the virtual currency, when the virtual currency is understood, for the purposes of the AML Act, as an electronically stored unit regardless the fact it has or does not have an issuer and which is not pecuniary mean under the Act on Payments, but it is received as payment for goods and services also by a person different from its issuer. Beside operators of virtual (digital) currency exchange offices, also operators of e-shops whose payment gateways enable transfer of virtual currency from a buyer to a seller when they purchase goods, providers of account management in virtual currency or management of “electronic purse”, or operators of the so-called “bitcoin ATM” fall under the mentioned category.
The AML Act further defines the person providing services connected with virtual currency. Under the provision of Section 4, paragraph 8 of the AML Act, the person providing services with virtual currency is a person whose subject of business activity is to purchase, sell and store, manage or intermediate purchase or sell of virtual currency for other person, eventually provide other services connected with virtual currency.
The result of the above mentioned is that the person obliged to perform KYC is not only a crypto exchange office, but also ICO token issuers who acquire financial resources from investors this way.
Certain duties are imposed by the legislators on the token issuers. The duties are e.g. the requirement of investor identification, the manner in which the identification is performed, further, examples when the control has to be performed etc., the AML Act is rather strict from the point of view of person identification, as it is required in most cases the persons are identified with physical presence (the so-called face-to-face). It is impossible to replace such expressed physical presence with remote transmission of images and sound (cp. Section 8 of the AML Act). Other “alternative“ procedures without physical presence during the identification are possible only in accordance with the provision of Section 10 and Section 11 of the AML Act. According to the provision of Section 10 of the AM Act, it is possible to intermediate the identification. The mediation is performed by request of a token issuer, or an investor. The identification in such case is performed by a public notary, or contact place of public service. Other possibility of identifying the investor, it is necessary to mention the most practicable one from the point of view of ICO, is to take over the identification under the provision of Section 11 of the AML Act. This manner of identification is performed without physical presence of the investor.
During the takeover of the identification, token issuers are obliged to acquire personal data from investors, such as name and surname, personal identification number, and if it was not assigned, date of birth, place of birth, sex, permanent or other residence and citizenship cp. Section 5(1)a) of the AML Act. Regarding the fact it is an electronic identification of persons, i.e. without physical presence of the investor, it is obliged to get other data for identification, such as phone number, address for electronic post delivery, data on employment or the employer (Section 5, paragraph 2 of the AML Act).
At the same time, the token issuer has duty to verify the information acquired from the potential investor at the qualified service provider creating trust, under directly applicable regulation of the EU regulating electronic identification and services creating trust for electronic transactions in the internal market [cp. Section 11(8)b) of the AML Act] and last but not least the issuer, as a person obliged from the AML Act, must not doubt about the client´s identity [Section 11(8)c) of the AML Act].
In case of issuing own tokens and their subsequent sale it is necessary to deal with duties set by the AML Act, especially in the relation towards proper identification of persons interested in tokens.
The recent announcement follows the European Commission’s latest roadmap from 23rd January, 2017 Also, at to curb the illicit use of cash and cryptocurrencies. The Commission has also noted an urgency of addressing money laundering and criminal financing involved with these types of payments.
Act No. 253/2008 Coll., on Selected Measures against Legitimisation of Proceeds of Crime and Financing of Terrorism
Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing and amending Directive 2009/101/EC
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