- EU’s new regulations target money laundering, potentially impacting CASPs.
- New rules oversee strict measures, including KYC for CASPs, to prevent money laundering.
In response to the growing concerns surrounding money laundering and illicit activities, the European Parliament on the 24th of April approved new regulations to combat the issues in the cryptocurrency space.
The rules will particularly affect Crypto-Asset Service Providers (CASPs), including centralized exchanges under Markets in Crypto-Assets (MiCA) regulations. MiCA is a regulatory framework introduced by the EU in 2023 to oversee digital assets and their markets.
The latest developments have led to a prominent question – Is the EU banning anonymous crypto transactions or self-custodial wallets?
Patrick Hansen’s insights
Well, a key highlight here is the establishment of a new regulatory body, the Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA), which is tasked with overseeing and enforcing the regulations.
Clearing the air around Anti-Money Laundering Regulations (AMLR), Patrick Hansen, Director of EU Strategy & Policy at Circle, took to X and noted,
“The AMLR is not a crypto regulation.”
He added,
“I am certainly not a fan of the AMLR. For example, I don’t agree with lowering the thresholds for cash payments or further restricting the e-money exemption for low value, low-risk payments.”
This emphasizes that obligated entities (OEs), including financial institutions and crypto-asset service providers (CASPs), must adhere to the Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) framework.
Moreover, non-financial entities like football clubs or gambling services also fall under the classification of OEs according to the AMLR.
However, the AMLR imposes obligations only on OEs and service providers, excluding hardware/software providers or self-custody wallets without access/control over crypto assets.
Additional steps against money laundering
Additionally, according to a press release by the Europen Union, CASP has to enforce strict Know Your Customer (KYC) procedures to prevent money laundering.
“The new laws include enhanced due diligence measures and checks on customers’ identity, after which so-called obliged entities (e.g. banks, assets, and crypto assets managers or real and virtual estate agents) have to report suspicious activities to FIUs and other competent authorities.”
Criticizing the above sentiment, Hansen added,
“This is nothing new, as all crypto exchanges & custodial wallet providers in the EU are already subject to these obligations under the current AMLD5.”
Way forward
The regulations received strong support, with “479 votes in favor, 61 against, and 32 abstentions”. Additionally, the Council of the EU is anticipated to formally adopt them.
Despite initial concerns, the regulations have scaled back proposals impacting the crypto sector, such as capping self-custody payments and imposing AML obligations on DAOs and DeFi platforms.
Overall, the regulations closely align with existing laws, echoing provisions found in the MiCA regulation.
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