EU to introduce crypto regulations to fight money laundering

The European Parliament has approved new regulations establishing formal due diligence obligations for cryptocurrency companies in a bid to combat money laundering.

The new rules aim to improve “due diligence measures and identity checks” for clients, and will extend to entities such as crypto asset managers. These entities are required to report any suspicious activity to the authorities.

This new law, approved on April 24, will affect Crypto-asset Service Providers (CASPs), such as the Centralized Crypto-assets under Crypto-Assets (MiCA) Regulation and various other entities, including gambling services.

MiCA is a regulatory framework introduced by the European Union to regulate digital assets and their markets. It entered into force in June 2023 and will be fully implemented by the end of the year.

A new agency, the Anti-Money Laundering and Prevention of Terrorism Financing Authority (AMLA), has been named to oversee and monitor the implementation of the new regulations.

AMLA's office is located in Frankfurt, Germany. However, the law has not been formally approved by the Council and has not yet been published in the EU Official Journal.

Patrick Hansen, director of EU strategy and policy at Circle, said in a post on X that he expects the vote's outcome. He mentioned that the package will be officially approved by the EU Council and will come into force after three years.

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In another post, Hanson mentioned that these CASPs are required to adhere to procedures such as Know Your Customer (KYC) and Anti-Money Laundering (AML) due diligence.

He said this requirement is not new as all crypto exchanges and wallet providers in the EU are obliged to comply with these regulations under current legislation.

Hanson described the final version as a “positive result” for the crypto sector. Earlier proposed AMLR iterations suggested a more stringent approach, which would mandate KYC on self-custodial originator/user.

However, he praised industry efforts to support a risk-based approach with multiple options, ultimately leading to consensus.

Last month, a majority of the European Parliament's steering committee repealed the 1,000-euro ($1,080) limit on cryptocurrency payments from self-hosted crypto wallets as part of new AML rules.

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