The European Union has reached a provisional agreement on new anti-money laundering (AML) rules that will affect the crypto industry. The new rules, which are part of the AML/CFT package proposed by the European Commission in July 2021, aim to enhance the EU’s ability to prevent and combat money laundering and terrorist financing, as well as to ensure a level playing field for all actors in the financial sector.
The crypto industry has cautiously welcomed the agreement, which is expected to be formally adopted by the European Parliament and the Council of the EU in the coming months. The agreement introduces a number of changes to the existing AML framework, such as:
Creating a new EU-level authority, the Anti-Money Laundering Authority (AMLA), that will supervise and coordinate national AML authorities and have direct supervisory powers over some high-risk entities.
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Extending the scope of AML rules to cover all crypto-asset service providers (CASPs), such as exchanges, wallets, custodians, brokers, and issuers of crypto-assets. CASPs will have to register with AMLA or a national authority and comply with customer due diligence, transaction monitoring, and reporting obligations.
Establishing a single EU-wide list of high-risk third countries that pose a threat to the EU’s financial system and imposing enhanced due diligence measures on transactions involving those countries.
Harmonizing the rules on beneficial ownership registers, which will require all legal entities and trusts to disclose their ultimate owners and make this information accessible to the public.
Introducing a limit of 10,000 euros for large cash payments, which will apply to both professional and non-professional transactions.
The crypto industry has expressed support for the EU’s efforts to create a clear and harmonized regulatory framework for crypto assets, which could foster innovation, competition, and consumer protection. However, some industry representatives have also raised concerns about the potential impact of the new rules on privacy, innovation, and competitiveness.
For instance, some CASPs have argued that applying the same AML rules as traditional financial institutions could undermine the privacy and security of crypto users, as well as create excessive compliance costs and barriers to entry for smaller players. Some CASPs have also questioned the feasibility and effectiveness of applying AML rules to decentralized platforms and protocols that operate without intermediaries or central authorities.
Moreover, some industry experts have warned that the new rules could create regulatory fragmentation and uncertainty in the global crypto market, as different jurisdictions may adopt different approaches to AML regulation. They have called for more international cooperation and coordination among regulators to ensure a consistent and balanced approach that respects the global nature of crypto assets.
The agreement on the new EU AML rules is a significant milestone for the crypto industry, as it signals the EU’s recognition of crypto assets as a legitimate and important part of the financial system. However, it also poses significant challenges and opportunities for CASPs and crypto users, who will have to adapt to the new regulatory environment and ensure compliance with the new rules.
The final outcome of the agreement will depend on how it is implemented and enforced by AMLA and national authorities, as well as how it interacts with other existing or upcoming regulations on crypto assets in the EU and beyond.
US stock futures rise early Monday after the S&P 500 hit a record high Friday
US stock futures rose early Monday after the S&P 500 hit a record high Friday 19th January 2024. The positive momentum was driven by strong earnings reports, easing inflation fears and optimism about the economic recovery from the pandemic.
The S&P 500 futures gained 0.4%, indicating a higher open for the benchmark index, which closed at an all-time high of 5,321.67 on Friday. The Dow Jones Industrial Average futures also rose 0.4%, while the Nasdaq 100 futures advanced 0.5%.
The earnings season kicked off last week with some of the biggest banks and tech companies reporting better-than-expected results. According to FactSet, more than 80% of the S&P 500 companies that have reported so far have beaten analysts’ estimates. The blended earnings growth rate for the fourth quarter of 2023 is now 25.2%, up from 21.7% at the end of December.
Investors also shrugged off the latest inflation data, which showed that consumer prices rose 6.8% year-over-year in December, the highest since 1982. The core inflation, which excludes food and energy, rose 4.9%, the highest since 1991. However, many analysts and policymakers believe that inflation is transitory and will ease as supply chain bottlenecks and labor shortages are resolved.
Meanwhile, the economic outlook remains bright as the Omicron variant of the coronavirus appears to be less severe and more people get vaccinated and boosted. The U.S. added 199,000 jobs in December, below expectations but still enough to push the unemployment rate down to 3.9%, the lowest since February 2020. Consumer confidence rebounded in January, reaching the highest level since July.
The market will be watching for more earnings reports this week, as well as some key economic data, such as housing starts, existing home sales and leading indicators. The Federal Reserve will also hold its first policy meeting of the year on Tuesday and Wednesday, where it is expected to announce a faster tapering of its bond-buying program and signal a possible interest rate hike in March.
On the positive side, inflation can boost corporate revenues and earnings, as companies can charge higher prices for their products and services. This can increase their stock prices and dividends, benefiting shareholders. Inflation can also stimulate economic growth and consumer spending, which can drive up the demand for stocks.
On the negative side, inflation can increase the cost of production and operation for companies, reducing their profit margins and cash flows. This can lower their stock prices and dividends, hurting shareholders. Inflation can also increase the interest rates and the cost of borrowing, making it harder for companies to finance their projects and expand their businesses. This can reduce their growth potential and future earnings, weighing on their stock valuations.
Therefore, the impact of inflation on stocks depends on the magnitude, duration, and source of inflation, as well as the industry, sector, and company-specific factors. Some stocks may perform better than others in an inflationary environment, depending on their ability to pass on the higher costs to customers, maintain or increase their market share, and hedge against inflation risks.
Generally speaking, stocks that have strong pricing power, stable demand, low debt levels, and high dividend yields tend to do well in inflationary periods, while stocks that have weak pricing power, cyclical demand, high debt levels, and low dividend yields tend to struggle in inflationary periods.