The biggest news of the week for blockchains and cryptocurrencies was that the European Union's Fifth Anti-Money Laundering Directive (AMLD5) went into effect on Friday. The new regulations require crypto exchanges and custodial service firms to register with their local regulators and show compliance with thorough know-your-customer (KYC) and anti-money laundering (AML) policies. Besides the extra KYC and reporting obligations, AMLD5 gives financial watchdogs and law enforcement greater power and oversight. The new rules are a double-edged sword for the blockchain industry, as the costs of compliance may burden smaller firms and push them to depart or merge. Deribit, a Netherlands-based crypto derivatives exchange, plans to relocate to Panama due to the burden of AMLD5. On the positive side, the long-term effect could be greater trust in the cryptocurrency sector from European financial institutions.

Here is the rest of the week in review:

Illinois became the latest U.S. state to recognize smart contracts and other blockchain-based records as legal instruments. The Blockchain Technology Act, sponsored by Rep. Keith Wheeler, took effect on the new year, legalizing a number of potential innovative scenarios for blockchain-based contracts. The law states: "A smart contract, record or signature may not be denied legal effect or enforceability solely because a blockchain was used to create, store or verify the smart contract, record or signature." The Illinois law extends the same legal recognition enjoyed by paper contracts to blockchain contracts so the state sees them as legally binding. The law also protections from local interference meaning municipalities cannot enact taxes and regulations or require licensing or permits on blockchain systems or people using them. But some legal experts believe the law will be tested in courts by parties who want to try to invalidate a blockchain transaction.

Ethereum Classic (ETC) successfully completed the "Agharta" hard fork at block number 9,573,000 on Sunday morning, according to etcnodes.org. Similar to the network's last upgrade in September, Atlantis, Agharta makes Ethereum classic more interoperable with sister-chain Ethereum (ETH). As part of the hard fork, the Constantinople and St. Petersburg upgrades deployed in tandem on the Ethereum blockchain in February will be enabled under Ethereum Classic Improvement Proposal 1056. The 22nd largest cryptocurrency by market capitalization, Ethereum Classic split off from Ethereum following a controversial divorce in the aftermath of the 2016 DAO hack. The Agharta hard fork is an effort toward the goal of rebuilding the relationship between the two chains.

Crypto prices rose to $217.6 billion this week in a somewhat convincing upward move. For the majors, Bitcoin SV (BSV), Bitcoin Cash (BCH), and EOS made outsized gains, while Tether (USDT) was the only coin to slip. In the top 100, the biggest losers were Synthetix Network (SNX), down 29%, Quant (QNT), down 13%, and ABBC Coin (ABBC), down 13%. The biggest gainers were Bitcoin SV, up a whopping 43%, Ren (REN), up 31%, and Horizen (ZEN), up 25%. Next week traders will see if crypto can post another winning week.

The author does not hold any positions in any of the securities above.