In a significant development, European Union-based cryptocurrency companies are now brought under the purview of the region’s banking watchdog as part of the ongoing efforts in the “fight against financial crime.” The European Banking Authority (EBA) announced on January 16 that it has extended the Anti-Money Laundering and Counter-Terrorist Financing guidelines to encompass European crypto firms.
The amended guidelines issued by the EBA are designed to assist crypto asset service providers (CASPs) in identifying their exposure risk to financial crimes based on various factors such as “customers, products, delivery channels, and geographical locations.” The guidelines also provide directives on how crypto companies should adapt their measures to combat financial crimes, including the potential use of “blockchain analytics tools.”
These guidelines, which came into effect on December 30, 2023, represent a crucial step in the EU’s efforts to combat financial crime. By harmonizing the approach for crypto firms across the union, the EBA aims to mitigate the risks associated with money laundering and terrorist financing in the cryptocurrency sector.
The updated guidelines specifically address risks and provide guidance tailored to cryptocurrency and crypto-related activities. Financial firms holding or serving crypto entities are expected to incorporate these guidelines into their risk assessments. Furthermore, the guidance instructs crypto firms to evaluate potential risks associated with features like “anonymity-enhancing features,” self-hosted wallets, decentralized platforms, and products facilitating transfers between the company and such services.
This move follows the EU’s earlier finalization of the Transfer of Funds Regulation (ToFR) in 2023, which governs cryptocurrency transfers, along with the comprehensive Markets in Crypto-Assets (MiCA) regulations. MiCA, which includes investor protections for crypto, is set to take effect in December, allowing EU member states the option to implement an 18-month transitional period for CASPs, permitting them to operate without a license during this period.
