EU Expands Anti-Money Laundering Rules to Include Crypto Firms

• EU Banking Watchdog Provides Guidance for Crypto Firms
• Understanding the Risks Involved in Crypto Transactions
• Regulating the Transfer of Digital Assets
• Internal Policies and Controls for Crypto Asset Service Providers
• Compliance Reporting and Implementation Timeline

EU Banking Watchdog Provides Guidance for Crypto Firms

The European Banking Authority (EBA), the banking regulator for the European Union, has recently released guidelines for cryptocurrency firms to ensure their compliance with anti-money laundering (AML) and counter-terrorist financing regulations. The EBA is extending its current regulations to include cryptocurrency, aiming to standardize the approach adopted by crypto asset service providers (CASPs) across the EU for combating financial crime.

Understanding the Risks Involved in Crypto Transactions

The EBA emphasized the potential risks associated with crypto transactions, such as the speed of crypto-asset transfers and the ability of certain products to mask the user's identity. To minimize these risks, CASPs need to understand them fully and implement effective risk mitigation measures.

Regulating the Transfer of Digital Assets

In the past year, the EU has finalized legislation concerning the transfer of funds through digital assets, in tandem with its groundbreaking Markets in Crypto Assets (MiCA) regulatory package. Subsequently, the EBA has issued guidelines on risk-based supervision of CASPs and is considering proposed guidelines to prevent the misuse of crypto transfers. These guidelines align with the recommendations made by the international watchdog, the Financial Action Task Force (FATF).

Internal Policies and Controls for Crypto Asset Service Providers

The EBA is also working on additional guidelines related to the internal policies and controls that CASPs should implement. It recognizes the interconnected nature of the financial sector and accordingly, the new guidelines also provide advice for other credit and financial institutions that serve CASPs or have exposure to crypto assets.

Compliance Reporting and Implementation Timeline

Authorities are required to report on their compliance with the new guidelines within two months of their translation into the official EU languages. The guidelines are set to be implemented from December 30, which coincides with the full enforcement of the MiCA regulations.

Edited by Jonathan Stoker