AMLD1 First Anti-Money Laundering Directive
AMLD2 Second Anti-Money Laundering Directive
AMLD3 Third Anti-Money Laundering Directive
AMLD4 Fourth Anti-Money Laundering Directive
AMLD5 Fifth Anti-Money Laundering Directive
BIS Bank for International Settlements
CPMI Committee on Payments and Market Infrastructures
DAC5 Fifth revision of the Directive on administrative cooperation in taxation
DLT Distributed ledger technology
EBA European Banking Authority
ECB European Central Bank
EIOPA European Insurance and Occupational Pensions Authority
ESMA European Securities and Markets Authority
FATF Financial Action Task Force
FIU Financial intelligence unit
FTR Funds Transfer Regulation
IMF International Monetary Fund
ITO Initial Token Offering
MTF Multilateral trading facility
OTF Organised trading facility
P2P Peer to Peer
PoS Proof of Stake



2.1.1. Defining blockchain: a technology with many faces
Blockchain is a particular type or subset of so-called distributed ledger technology (“DLT”).
8 DLT is a
way of recording and sharing data across multiple data stores (also known as ledgers), which each
have the exact same data records and are collectively maintained and controlled by a distributed
network of computer servers, which are called nodes.
Blockchain is a mechanism that employs an encryption method known as cryptography10 and uses (a
set of) specific mathematical algorithms to create and verify a continuously growing data structure –
to which data can only be added and from which existing data cannot be removed – that takes the
form of a chain of “transaction blocks”11, which functions as a distributed ledger.12
In practice, blockchain is a technology with many “faces”. It can exhibit different features and covers a
wide array of systems that range from being fully open and permissionless, to permissioned13:
• On an open, permissionless blockchain, a person can join or leave the network at will, without
having to be (pre-)approved by any (central) entity.14 All that is needed to join the network and
add transactions to the ledger is a computer on which the relevant software has been installed.
There is no central owner of the network and software, and identical copies of the ledger are
distributed to all the nodes in the network.15 The vast majority of cryptocurrencies currently in
circulation is based on permissionless blockchains (e.g. Bitcoin, Bitcoin Cash, Litecoin, …).
• On a permissioned blockchain, transaction validators (i.e. nodes) have to be pre-selected by a
network administrator (who sets the rules for the ledger) to be able to join the network.16 This
allows, amongst others, to easily verify the identity of the network participants.
17 However, at the
same time it also requires network participants to put trust in a central coordinating entity to

select reliable network nodes.
18 In general, permissioned blockchains can be further divided into
two subcategories. On the one hand, there are open or public permissioned blockchains, which can
be accessed and viewed by anyone, but where only authorised network participants can generate
transactions and/or update the state of the ledger.19 On the other hand, there are closed or
“enterprise” permissioned blockchains20, where access is restricted and where only the network
administrator can generate transactions and update the state of the ledger.21 What is important
to note is that just like on an open permissionless blockchain, transactions on an open
permissioned blockchain can be validated and executed without the intermediation of a trusted
third-party. Some cryptocurrencies, like Ripple and NEO utilise public permissioned blockchains.22

a. The blockchain is a distributed database
In simple terms, the blockchain can be thought of as a distributed database. Additions to this
database are initiated by one of the members (i.e. the network nodes), who creates a new “block” of
data, which can contain all sorts of information. This new block is then broadcasted to every party in
the network in an encrypted form (utilising cryptography) so that the transaction details are not
made public.
23 Those in the network (i.e. the other network nodes) collectively determine the block’s
validity in accordance with a pre-defined algorithmic validation method, commonly referred to as a
“consensus mechanism”24. Once validated, the new “block” is added to the blockchain, which
essentially results in an update of the transaction ledger that is distributed across the network.
In principle, this mechanism can be used for any kind of value transaction and can be applied to any
asset that can be represented in a digital form26. We illustrate this in Figure 1 below.

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