TLDR
The European Banking Authority (EBA) has issued new ‘travel rule’ guidelines for crypto exchanges and service providers
These guidelines will come into effect on December 30, 2024, giving companies 6 months to prepare
The rules require reporting of information on transfers of funds and crypto assets to combat money laundering and terrorist financing
Crypto asset service providers (CASPs) will be subject to the EU’s Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) regime
The European Banking Authority (EBA) has announced new ‘travel rule’ guidelines that will apply to crypto exchanges and service providers operating in the European Union.
These regulations, set to take effect on December 30, 2024, give companies a six-month window to prepare for compliance.
The new guidelines, issued on July 4, 2024, are part of Regulation (EU) 2023/1113, which extends the obligation to include information about the originator and beneficiary to Crypto Asset Service Providers (CASPs).
This regulation brings the EU’s legal framework in line with the Financial Action Task Force (FATF)’s standards and aims to establish a consistent and effective approach to implementing the travel rule across the EU.
The #EBA has just published new guidelines on the information that should accompany transfers of funds and certain crypto assets.
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— EU Banking Authority – EBA ???????? (@EBA_News) July 4, 2024
Under these new rules, crypto exchanges and service providers will be required to report detailed information on transfers of funds and crypto assets.
This includes collecting users’ information for transfers, identifying whether transactions are related to the purchase of services, and detecting transfers that appear to be linked.
The guidelines also mandate that CASPs declare their policies on multi-intermediation and cross-border transfers.
The primary objective of these regulations is to prevent, detect, and investigate money laundering and terrorist financing by allowing relevant authorities to fully trace transfers of funds and crypto assets.
This move signifies a major step in bringing crypto assets under the same regulatory scrutiny as traditional financial services.
Simon Schneider, Director of AML Compliance at CryptoFirm, commented on the new regulations:
“These guidelines represent a significant shift in how crypto businesses will need to operate in the EU. While compliance may initially be challenging, it’s a necessary step towards legitimizing the crypto industry and protecting it from illicit activities.”
The EBA acknowledges that achieving compliance with these guidelines will likely put crypto exchanges and service providers under financial stress.
However, the regulatory body anticipates that the overall benefits will outweigh the potential costs in the long run, contributing to a more effective fight against money laundering and terrorist financing.
It’s important to note that crypto exchanges and service providers that currently fall within the scope of 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 in addition to these new guidelines.
The implementation process includes a two-month buffer period for payment service providers (PSPs), intermediary PSPs, CASPs, and intermediary CASPs to declare adherence to the new requirements after the regulation sets in. This period begins after the publication of the translations into the official EU languages.
These guidelines are part of a broader regulatory framework being developed by the EBA. The authority has also published guidelines on risk-based AML/CFT supervision of CASPs and guidelines for CASPs to effectively manage their exposure to money laundering and terrorist financing risks.
The EBA is finalizing work on guidelines for internal policies, procedures, and controls to comply with restrictive measures that apply to CASPs and other financial institutions.
The crypto industry’s response to these new regulations has been mixed. While some see it as a necessary step towards mainstream adoption and improved security, others worry about the potential impact on user privacy and the operational challenges it may present.
Maria Lopez, CEO of EuroCrypto Exchange, stated,
“While we fully support measures to combat financial crimes, implementing these guidelines will require significant resources and may impact the speed and ease of transactions that our users have come to expect. We’re working hard to find a balance between compliance and user experience.”
As the deadline approaches, crypto businesses operating in the EU will need to carefully review their current practices and make necessary adjustments to ensure compliance. This may involve updating their KYC (Know Your Customer) procedures, enhancing their transaction monitoring systems, and potentially revising their operational processes.
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