EU Cracks Down on Crypto With Stricter Anti-Money Laundering Rules

• EU tightens AML regulations, bringing crypto-asset service providers (CASPs) under regulatory oversight.
• CASPs must conduct customer due diligence on transactions ≥€1,000, verify identities, and report suspicious activity.
• Provisions are subject to approval by the Committee of Permanent Representatives and European Parliament.

The crypto sector is bracing for stricter anti-money laundering (AML) regulations as the European Union tightens its net on financial crime. As part of a comprehensive AML package, the Council and Parliament reached a provisional agreement that brings crypto-asset service providers (CASPs) under the regulatory fold.

The agreement expands the list of obligated entities to include most CASPs, compelling them to conduct customer due diligence on transactions of €1,000 or more, verify customer identities, and report suspicious activity.

These measures aim to increase transparency and prevent illicit funds from flowing through the crypto ecosystem. The deal also adds measures to mitigate risks concerning transactions with self-hosted wallets.

Furthermore, the regulation introduces enhanced due diligence measures for cross-border correspondent relationships involving CASPs.

“This will ensure that fraudsters, organized crime, and terrorists will have no space left for legitimizing their proceeds through the financial system,” said Vincent Van Peteghem, Belgian Minister of Finance.
This landmark agreement marks the first time the EU will comprehensively harmonize AML rules across member states, closing loopholes previously exploited by criminals. The accord aims to fortify the EU’s defenses against money laundering and terrorist financing activities.

The agreed-upon provisions will be subject to approval by the Committee of Permanent Representatives and the European Parliament before becoming law. On May 16, 2023, the EU approved a legal framework called Markets in Crypto-Assets (MiCA) to regulate the crypto-assets sector. MiCA aims to protect investors, prevent misuse of cryptocurrencies, and establish comprehensive guidelines for issuers and service providers

In similar news, U.S. legislators recently introduced the Terrorism Financing Prevention Act to counter the use of crypto in funding terrorism. The bipartisan bill, driven by the Hamas October 7 attacks on Israel, aims to impose sanctions on digital assets used by foreign actors for terror funding.