The European Commission has published an impact assessment that proposes an introduction of a restriction of cash payments to reinforce the EU framework on the prevention of terrorism financing.

According to the Commission, cash has the feature of offering anonymity to transactions. While such anonymity may be desired for privacy reasons, it makes it possible to use cash for illicit activities such as money laundering and terrorist financing.

“By restricting the possibilities to use cash, the proposal would contribute to disrupt the financing of terrorism, as the need to use non anonymous means of payment would either deter the activity or contribute to its easier detection and investigation”, the document reads.

It further said that such an initiative would be complementary to the specific actions addressed by the review of the AML Directive targeting risks posed, among other things, by virtual currencies and prepaid instruments when they are used anonymously.

In July 2016, the European Commission adopted a proposal to further reinforce EU rules on anti-money laundering to counter terrorist financing and increase transparency about who really owns companies and trusts. The proposal, amending the Fourth Anti-Money Laundering Directive, inter alia, aims to bring virtual currency exchange platforms and custodian wallet providers under the scope of the Directive.

Taking into consideration this emerging new sector, the document further said:

“In view of the development of cryptocurrencies and the existence of other means of payments ensuring anonymity, an option could be to extend the restrictions to cash payments to all payments ensuring anonymity (cryptocurrencies, payment in kinds, etc.). On the other hand, restrictions on cash payments could promote the development of alternative payments technologies compatible with the non-anonymity objective pursued.”