The European Commission is proposing the creation of a database that will hold information on those using virtual currencies and that will record data on the users’ real-world identity, along with all associated wallet addresses. This is under the guise of “fighting terrorism.”

This is the first proposal part of an action plan that the EU got rolling after the Paris November 2015 terror attacks and that it officially put forward in February 2016 and later approved at the start of July 2016.

As we wrote in our article from a few weeks back, the action plan, a reform of the Anti-Money Laundering Directive (AMLD) so it would also include the terms “virtual currency,” was only approved by the (EU President) Juncker Commission.

New AMLD will end anonymous Bitcoin transactions in the EU

This action plan is now making its way through the rest of the EU regulatory body, with the European Commission now in charge of putting the reformed AMLD to paper. As expected, the first draft of the AMLD now includes mentions to virtual currencies.

Besides recognizing crypto-currencies as another form of money, the draft also includes a set of regulations that would provide FIUs (financial intelligence units) with the tools needed to keep track of digital currencies, in the same way they do with fiat currencies.

To combat money laundering via digital currencies, EU officials plan to create a database that links Bitcoin and other crypto-currency addresses with real-world individuals, essentially putting an end to the anonymity that accompanies such payments.

FIUs across member states will have the power to create and then manage such databases, but users will also be allowed to register on their own, as a sign of good faith. The current AMLD draft reads:

The report shall be accompanied, if necessary, by appropriate proposals, including, where appropriate, with respect to virtual currencies, empowerments to set-up and maintain a central database registering users’ identities and wallet addresses accessible to FIUs, as well as self-declaration forms for the use of virtual currency users.

As mentioned when ministers from various countries met in Brussels last year, the EU is interested in regulating Bitcoin and similar currencies so that it would be harder for terrorists and cyber-criminal groups to use the currency to hide their operations and move large sums of money across borders.

Digital currency exchanges and wallet providers operating in Europe will most likely have to abide by the reformed AMLD and force EU users to register with their real information so that FIUs could track down individuals behind suspicious operations.

Bitcoin is regularly used for ransomware payments, in human trafficking (slavery, prostitution rings), kidnappings, extortions, hacking tools, and all sorts of illegal services and products.

Initial estimations have the reformed AMLD reaching the European Parliament for a final vote later in the year.