European Banking Authority Calls for Enhanced Anti-Money Laundering Rules for Crypto Providers – Regulation Incoming?

Last updated: November 23, 2023 20:21 EST
. 2 min read

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The European Banking Authority (EBA) aims to update the Anti-Money Laundering and Combatting the Financing of Terrorism (AML/CFT) rules for crypto providers.

In a consultation paper released on November 24, the banking regulator of the European Union acknowledged that current EU regulations lack the necessary teeth to ensure compliance with AML/CFT standards in the crypto industry.

Interested parties have until February 26, 2024, to provide their input on the proposed guidelines.

The EBA’s proposals include the integration of AML/CFT criteria for payment service providers and crypto asset service providers (CASPs).

The goal is to streamline regulations and promote interoperability among these entities.

By enhancing the interoperability of their protocols, CASPs will be required to “enable the transmission of information in a seamless and interoperable manner.”

Additionally, the new rules would mandate CASPs to obtain and retain information on self-hosted addresses.

They would also need to ensure the traceability of crypto asset transfers by verifying the ownership or control of the addresses held by their customers.

Although the EBA does not specify the frequency, the requirements would be triggered when the transfer amount from the self-hosted account exceeds €1,000.

Assuming the consultation process proceeds smoothly, the updated guidelines are expected to take effect on December 30, 2024.

The new consultation paper comes after the EBA released another paper in October, which assessed the suitability of management body members and stakeholders in issuers of asset-referenced tokens and CASPs.

In July, the EBA also encouraged stablecoin issuers to voluntarily comply with specific guiding principles related to risk management and consumer protection.

EU Issues Draft Regulations for Stablecoin Issuers

In other major crypto regulation news, the EU has recently moved forward with fortifying regulations for stablecoin (fiat-pegged) cryptos.

By ensuring stablecoin reserves can readily be monetized, and requiring issuers to enact robust liquidity monitoring procedures, the EU aims to address asset-backing and stability risks.

Last month, the EU also adopted the Eighth Directive on Administrative Cooperation (DAC8), a new guideline for crypto-asset service providers to report certain information about their clients’ transactions to the tax authorities of the EU member states in which the clients reside.

The directive is set to go into force in 2024.

The European Commission emphasized that DAC8’s crypto provisions are designed to work in conjunction with the recently finalized MiCA and anti-money laundering rules established under the Transfer of Funds Regulation (TFR).

Under MiCA, cryptocurrency companies and exchanges are obliged to obtain licenses for operating within the European Union. Additionally, the regulation mandates that issuers of stablecoins maintain appropriate reserves to ensure their stability and security.