Victims of cryptocurrency crime do not warrant any special fund to compensate them for their losses, the European Union’s executive branch has ruled. The European Commission shot down a petition to have a special fund that receives tax contributions from all European digital currency nodes and compensates victims of fraud, hacks and theft.
The petition was submitted earlier this year by Jonathan Levy, a London-based solicitor and attorney. He proposed the creation of a fund that would receive a small contribution from each node in Europe, 0.00001 cents per euro. This fund would compensate victims of digital currency fraud, theft and extortion in Europe.
The European Commission has shot the petition down in its reply. In its rejection, the Commission pointed to the recent proposal on digital assets regulation in the European Union which it believes will protect European users. In addition, the region already has the 5th Anti-Money Laundering Directive (AMLD5) that creates legal certainty for users. The Commission also pointed out that it will be making more substantive changes to the anti-money laundering framework in 2021.
Fraud, extortion and hacking involving digital currencies are matters of criminal law. As such, victims should pursue them through national law enforcement agencies. The Commission further pointed out that these crimes are not specific to digital assets. In addition, most of the losses incurred through exchange hacks and ICOs are not within the EU.
“The Commission does not have the competence to set up a compensation fund for victims of financial crime. […] The Commission suggests that the petitioners continue to pursue their respective cases through national law enforcement agencies and seek compensation through existing channels or with the legal persons responsible for their loss.”
Levy, the petitioner, replied to the rejection days later, accusing the Commission of “anti-consumer sentiments.”
He stated, “If lack of past enforcement is any indication of the future, consumers will continue to be victimized at an ever growing rate under the illusion that crypto assets are now safe because they are regulated by the EU Commission’s emerging crypto asset regime.”
Levy also disputed the Commission’s claim that most of the fraud happens outside the EU.
“At least €4-5 billion in crypto asset fraud occurs annually in the EU according to the EUP’s own finding.”
He claimed that the Commission delegated top level domain (TLD) .EU has continued to host the OneCoin scam which has defrauded victims of over €4 billion.