New Regulations Tighten Control on Cryptocurrency Transactions in the EU

The European Banking Authority (EBA) has announced new guidelines to enhance Anti-Money Laundering (AML) measures for crypto-asset service providers (CASPs) and their intermediaries in the European Union. These guidelines extend the Travel Rule to crypto transactions, requiring detailed reporting on fund and crypto asset transfers.

Starting December 30, 2024, the regulation (EU) 2023/1113, known as the Travel Rule guidelines, will apply to CASPs, as outlined in the EU’s Markets in Crypto-Assets Regulation (MiCA). This change subjects crypto service providers to the same AML and Counter-Terrorist Financing (CFT) regulations as traditional financial institutions.

After the December deadline, there will be a two-month grace period for payment service providers (PSPs), intermediary PSPs, CASPs, and intermediary CASPs to comply. They must collect user information for all transfers, identify service-related transactions, and detect suspicious transfers.

Crypto service providers will also need to establish clear policies on transactions involving multiple intermediaries and cross-border transfers. Although compliance might impose financial pressure on crypto exchanges, the EBA believes the benefits will outweigh the costs by enhancing the fight against money laundering and terrorist financing.

The anonymity of crypto transactions has made them attractive for illicit activities. By enforcing these new guidelines, the EBA aims to increase transparency and reduce the risk of such activities.

CASPs already subject to the EU’s Anti-Money Laundering Directive (AMLD) or domestic AML/CFT regimes will continue under those regulations. The new guidelines simply broaden the scope to include the growing crypto market in the EU.