Crypto Exchanges in the EU to Face Stricter AML Rules Under New EBA Guidelines

Crypto Exchanges in the EU to Face Stricter AML Rules Under New EBA Guidelines

In a significant move to strengthen Anti-Money Laundering (AML) measures, the European Banking Authority (EBA) has announced the extension of the Travel Rule guidelines to include crypto service providers and their intermediaries.

Starting December 30, crypto exchanges operating within the European Union will be required to comply with Regulation (EU) 2023/1113 (Travel Rule guidelines), which mandates the reporting of information on fund and crypto asset transfers.

As a result, crypto asset service providers (CASPs), as defined under the EU’s Markets in Crypto-Assets Regulation (MiCA), will fall under the EU’s Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) framework.

Impact of EU Travel Rules on Crypto Exchanges

Once the regulation takes effect, payment service providers (PSPs), intermediary PSPs, CASPs, and intermediary CASPs will have a two-month grace period to declare their adherence to the new requirements.

“The deadline for competent authorities to report compliance with the Guidelines will be two months after the publication of the translations.”

The general provisions include collecting users’ information for fund or crypto asset transfers, identifying whether the transaction involves purchasing services, and detecting linked transfers.

Moreover, crypto service providers and intermediaries will need to outline their policies on multi-intermediation and cross-border transfers.

Aiming for Long-Term Benefits

The EBA acknowledged that achieving compliance with the EU Travel Rule guidance might impose financial stress on crypto exchanges and service providers. However, the regulatory body expects overall long-term benefits.

“Overall, the benefits from these Guidelines are expected to outweigh potential costs, contributing to a more effective fight against ML/TF.”

Crypto exchanges and service providers already under the EU’s Anti-Money Laundering Directive (AMLD) or a domestic AML/CFT regime will continue to be subject to the applicable AML/CFT requirements.

As European governments tighten their oversight of crypto exchange activities, crypto protocols are taking a proactive approach toward compliance.

For instance, the Cardano Foundation, in collaboration with the Crypto Carbon Ratings Institute, has released sustainability indicators for the Cardano network to comply with MiCA regulations in the EU.

The report highlights that Cardano operates on a more energy-efficient consensus protocol, consuming significantly less electricity than proof-of-work protocols. It also provides metrics such as the total annualized electricity consumption and carbon footprint of the Cardano network, along with the marginal power demand per transaction per second.