Key Takeaways
- The legislation formalises due diligence requirements for crypto companies as part of the broader effort to tackle money laundering.
- Under the legislation, CASPs must adhere to the same AML regulations as banks for transactions exceeding €1,000
The European Parliament has passed new regulations aimed at combating anti-money laundering (AML) measures, including provisions targeting crypto exchanges. The legislation, which received approval on April 24, formalises due diligence requirements for crypto companies as part of the broader effort to tackle money laundering.
As per the announcement, the new legislation aims to enhance “due diligence measures and identity verification” for users, encompassing entities crypto asset managers.
One key provision states that crypto asset service providers (CASPs) must adhere to the same AML regulations as banks for transactions exceeding €1,000. Notably, the legislation no longer includes NFT platforms and Decentralized Autonomous Organizations (DAOs) under CASPs, although the European Commission will conduct a review by year’s end.
Self-hosted wallets have been a major point of contention, with CASPs prohibited from providing custody for anonymous crypto accounts or “anonymity-enhancing coins.” However, the legislation exempts self-hosted wallet providers from AML requirements.
Under the new rules, CASPs must implement measures to identify wallet holders involved in transactions, including enhanced monitoring and gathering additional information on the origin and destination of crypto assets. While these regulations add another layer of oversight, they align with existing requirements outlined in the Markets in Crypto-Assets (MiCA) regulation.
MiCA which is the first EU regulatory framework for crypto assets, governs the provision of crypto services and issuance of crypto assets within member states. In order to operate within the European Union, CASPs that fall under MiCA regulations will need a special license and authorization from a national financial regulator. These licenses come with strict requirements designed to safeguard investor funds and ensure the stability of the financial system.
These regulations, which includes three sets of anti-money laundering legislation, now await final approval from the European Council to be enacted.
Additionally, the establishment of the Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA) will oversee and supervise the implementation of these regulations.
This latest development comes on the heels of a provisional agreement reached in January, where the EU agreed on tougher anti-money laundering rules for cryptoassets as well as luxury goods dealers. Cryptoasset service providers have to conduct checks on transactions exceeding €1,000 and report suspicious activity. Moreover, cross-border crypto firms are required to conduct additional checks.
Last month, European Parliament’s lead committees removed a $1,080 limit on crypto payments from self-hosted crypto wallets as part of new anti-money laundering laws.
In response to the regulations, Patrick Hansen, Circle’s EU Strategy and Policy Director, dubbed the legislation as a positive outcome for the crypto industry. In his post on X, he added that the regulations provide a risk-based approach with various options, ensuring alignment with existing obligations under AMLD5.
