How do crypto regulations impact Irish businesses?

Despite the rapid global adoption rate of cryptocurrencies in recent years, the Irish government has not considered cryptocurrencies equivalent to fiat currencies.

To regulate the developments in the crypto space, the government has deferred to EU guidelines rather than create its own unique set of regulations. But how do these guidelines impact Irish businesses?

The announcements of major Irish tech investments show the Irish government wants to develop and adopt new technologies, especially in the financial sector. However, its stance on distributed ledger technology (DLT), cryptocurrencies, and virtual currencies hasn't been clear. 

In Ireland, cryptocurrencies are not outrightly prohibited, nor are there specific regulatory statutes governing their operations. Instead, the Central Bank of Ireland has emphasized the potential risks of investing in virtual currencies and initial coin offerings via consumer warnings. It itemized the absence of regulations and extreme price volatility as two significant risks associated with cryptocurrency investments. It also further stated that these risks are not mitigated by the later execution of the Anti Money Laundering (AML) and Countering Financial Terrorism (CFT) supervisory regimes. 

So, the legality of crypto assets in Ireland depends on the regulations guiding the cryptocurrency’s associated activities. Most times, existing regulations are EU regulations that implement specific EU single market directives in Ireland.  In essence, the Irish government maintains a “wait and see” approach regarding implementing crypto regulations as it is wary of potential long-term benefits and risks. 

For instance, crypto gambling isn’t illegal in the UK and Ireland. However, it's also not as regulated as gambling with fiat currencies. As such, people in industries that employ cryptocurrency might be unsure how much coverage they have by the government. This uncertainty is not helped, especially when you consider cryptonews.com's guide featuring top UK online casinos available and patronized by the Irish faithful. While many such platforms have licences from jurisdictions like Curacao, some players might still be unsure how well-protected they are when paying with anonymous crypto wallets at such sites. 

As a result, the impact of crypto regulations on Irish businesses dealing with crypto assets can be assessed based on the activities associated with their operations. Based on these activities, an Irish business might be concerned with either of the following:

• Ireland’s Anti-Money Laundering Framework (AML),
• The Criminal Justice’s Money Laundering and Terrorist Financing Act (CJA, 2010), 
• Existing Irish Financial Services regulatory regimes
• The EU’s regulation on Markets in Crypto Assets(MiCa)

Irish businesses involved with cryptocurrencies must examine the underlying services associated with such crypto payments or receivables. 

For instance, Irish crypto exchange businesses that settle payments of fiat currencies between crypto buyers and sellers are considered money remittance or transmittance businesses. Consequently, they are impacted by the Irish Payment Services regulations' specifications, which are similar to the European Union Payment Services Regulations 2018. 

Furthermore, Irish virtual asset service providers must register with the Central Bank of Ireland and comply with anti-money laundering regulations. This umbrella term includes businesses that exchange virtual currencies for fiat currencies and vice versa, exchange various forms of virtual currencies, conduct transactions involving virtual assets on behalf of others, custodian wallet providers, and providers of crypto assets financial services. 

The first and most comprehensive impact of these regulations on Irish businesses is confusion. The fact that the rules aren’t clear always leaves companies checking to see where they fall. 

For instance, companies carrying out “investment services” with “financial instruments” must be authorized as a MiFiD2 (Second Markets in Financial Directives) firm. On the other hand, firms whose businesses issue “electronic money” must be licensed under EMD2 as an electronic money institution. 

The list goes on. 

In addition to that, the existing crypto regulation framework opens Irish businesses to other risks. Some include absent or inadequate conduct of business requirements, uncertainties about mitigating and managing specific risks by governance arrangements, and a lack of a legal framework to decide on the rights and obligations of the business and its customers. The whole business space is quite chaotic, but only for a short time. 

In 2024, the EU’s proposed Digital Finance Strategy 2020 legislative framework is expected to address most of these issues. Soon, Irish businesses in the crypto space will be regulated with complete customer protection and governance requirements.