The European Commission and its partnering agencies including Europol have become increasingly active in its investigation on terrorist financing and and the use of digital currencies such as bitcoin in the dark web.

As a part of its global initiative to reduce and restrict financial flows of terrorists and money laundering, the European Commission has proposed to regulate digital currency exchange platforms under the scope of the Anti-Money Laundering Directive, which would require bitcoin exchanges to keep sensitive customer data records for bitcoin-to-fiat trading.

“These platforms have to apply customer due diligence controls when exchanging virtual for real currencies, ending the anonymity associated with such exchanges,” the European Commission announced this morning.

The primary issue with such an unexpected implementation of the Anti-Money Laundering Directive on bitcoin exchanges is that the regulatory bill would require bitcoin businesses to keep track of sensitive financial data for each of their customers. By doing so, however – it forces businesses to store customer data in a separate centralized server or database, leaving it vulnerable to potential hacking attacks or data breaches.

This is the precise reason behind the successful hacking attacks launched against social media and retail giants like Ashley Madison and Target. Since these companies accept credit card payments as their main source of income, they maintain a separate server in which all financial and personal data of their customers are stored; this includes addresses, names, social security codes, credit card numbers, etc.

Therefore, forcing bitcoin startups to keep track and record all customer data and financial information on trades will inevitably result a hacking attack, which may cost bitcoin exchanges million of dollars in loss.

Regardless of the negative impact of the implementation of the regulatory policy, European Commission Vice President Frans Timmermans aims to tighten financial laws and regulations for businesses to cut terrorists’ access to funds.

“With today’s Action Plan we are moving swiftly to clamp down on terrorist financing, starting with legislative proposals in the coming months. We must cut off terrorists’ access to funds, enable authorities to better track financial flows to prevent devastating attacks such as those in Paris last year, and ensure that money laundering and terrorist financing is sanctioned in all Member States. We want to improve the oversight of the many financial means used by terrorists, from cash and cultural artefacts to virtual currencies and anonymous pre-paid cards, while avoiding unnecessary obstacles to the functioning of payments and financial markets for ordinary, law-abiding citizens,” he said.

European Commission Co-Vice President Valdis Dombrovskis, who is in charge of the Euro and Social Dialogue further emphasized that strengthened financial policies, could reduce terrorists’ ability to travel and purchase illicit weapons such as explosive.

“We have to cut off the resources that terrorists use to carry out their heinous crimes. By detecting and disrupting the financing of terrorist networks, we can reduce their ability to travel, to buy weapons and explosives, to plot attacks and to spread hate and fear online. In the coming months the Commission will update and develop EU rules and tools through well-designed measures to tackle emerging threats and help national authorities to step up the fight against terrorist financing and cooperate better, in full respect of fundamental rights. It’s crucial that we work together on terrorist financing to deliver results and protect European citizens’ security,” said Dombrovskis.

It is still unclear whether the European Commission will push through with the implementation of the Anti-Money Laundering Directive on bitcoin businesses in 2016. However, it is certain that the strengthened financial policies of the European Commission will heavily affect bitcoin businesses and exchanges in Europe.