The European Parliament has taken step towards clamping down on money laundering within the cryptocurrency industry. New regulations, approved on April 24th, establish formal due diligence requirements for crypto companies.
This move aims to improve customer identification and verification processes (KYC) for crypto asset service providers (CASPs) – which includes centralized exchanges like Coinbase and Binance – and crypto asset managers. These entities will also be obligated to report suspicious activities to authorities.
MiCA Framework and AML Compliance
The new legislation falls under the umbrella of the Markets in Crypto-Assets (MiCA) regulation, a broader framework introduced in June 2023 to oversee digital assets and their markets within the EU. MiCA is expected to be fully enforceable by the end of 2024.
A newly established agency, the Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA), will be responsible for supervising the implementation of these anti-money laundering (AML) rules. While AML/KYC procedures are not entirely new for EU crypto businesses, the new regulations formalize and potentially strengthen these requirements.
Also Read: EU Cracks Down on Anonymous Transactions: Crypto Payments and Cash Face Restrictions
Transparency and Industry Response
While the formal adoption by the Council and publication in the EU Official Journal are pending, industry experts anticipate a smooth transition. Patrick Hansen, EU strategy and policy director at Circle, believes the final version represents a “positive result” for the crypto sector.
Earlier proposals suggested a more stringent approach, potentially mandating KYC checks on users of self-custody wallets (wallets not controlled by a third party). Industry efforts advocating for a risk-based approach with flexibility seem to have garnered positive outcomes. Notably, last month, a proposal for a 1,000-euro limit on cryptocurrency payments from self-hosted wallets was scrapped.
The new regulations highlight the EU’s ongoing efforts to establish a robust regulatory framework for the burgeoning cryptocurrency market. This focus on AML compliance aims to strike a balance between fostering innovation and mitigating financial crime risks within the crypto ecosystem.
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