The European Commission has proposed a strict set of rules that would end anonymous cryptocurrency transactions in a bid to crack down on terrorist financing.
The commission today said it plans to bring virtual currency exchange platforms under the scope of the Anti-Money Laundering Directive.
This will mean exchanges will have to apply due diligence controls to customers exchanging virtual currencies for real money, ending the anonymity associated with their use.
European Commission first vice-president Frans Timmermans said:
Today's proposals will help national authorities to track down people who hide their finances in order to commit crimes such as terrorism.
Member states will be able to get and share vital information about who really owns companies or trusts, who is dealing in online currencies, and who is using pre-paid cards. Making public the information on who is behind companies and trusts should also be a strong deterrent for potential tax-evaders.
A raft of other proposals were also put forward as part of the plan, which was first outlined in February.
These will include lowering the threshold on pre-paid cards to €150 (£126) from €250 and implementing stronger check on "risky" third countries, where additional due diligence checks will also be imposed.
The proposals will still need to be approved by the European Parliament and member states before becoming law, and it is unclear at this stage whether the rules will apply to the UK after its vote to leave the EU a fortnight ago.
Charles Hayter, founder of CryptoCompare, said: "Bitcoin is a pseudonymous crypto currency - your address is your identity. Regulating the market brings accountability and security for this potential avenue of terrorist financing with bitcoin, as well as pre-paid cards.
"The key for government though is not to stifle a nascent and innovative industry with onerous regulation where unnecessary - however, stopping terrorist financing is a must."