A proposed EU ban on crypto providers offering services from tax and money laundering havens raises "serious doubts" and could violate global trade rules, according to a European Commission document obtained by CoinDesk.
Lawmakers from the European Parliament have said crypto asset providers should not be authorized to offer services on the bloc if they originate from shady jurisdictions such as Panama, but commission officials, who are mediating late-stage talks on the law known as the Markets in Crypto Assets (MiCA) regulation, disagree.
"There is no such ban in other sectoral legislation," and it's not clear why it should apply only to cryptocurrencies, according to the paper, which was prepared to influence talks between governments and lawmakers trying to negotiate a final version of the MiCA law.
"Such a ban ... could create barriers to the provision of services in the EU and could therefore be seen as a breach of international commitments made at the World Trade Organization," it adds.
Officials have "serious doubts about the feasibility and proportionality" of a blacklist of non-compliant crypto-asset service providers that lawmakers want to see maintained by EU securities market regulator ESMA.
The commission paper said the criteria for the list were unclear and that such an initiative would be better left to a broader review of anti-money laundering (AML) laws covering sectors such as banking and the legal profession.
"We urge the [European Parliament] to reconsider and, if still necessary, to await discussions on the AML regulation," the paper says.
The Commission's document is marked as a "non-paper," meaning it does not represent the institution's official opinion. Parliament voted in March on its favored version of the bill, narrowly avoiding restrictions on energy-intensive proof-of-work technology that some called a bitcoin ban.
The EU maintains a blacklist of countries it believes promote tax avoidance or have shoddy money laundering controls. The latest version of the list includes territories such as the U.S. Virgin Islands, the Cayman Islands and Panama.
A spokesman for the commission declined to comment.