- The European Banking Authority (EBA) is seeking to update anti-money laundering (AML) and counter-terrorism financing (CFT) standards for crypto-asset service providers (CASPs).
- Proposed guidelines include merging AML/CFT criteria for payment service providers and CASPs, with a focus on enhancing protocol interoperability and regulating self-hosted wallets.
EBA’s Move to Fortify AML/CFT Compliance in Crypto
The European Union’s banking watchdog, the European Banking Authority (EBA), is set to strengthen the regulatory framework surrounding anti-money laundering (AML) and counter-terrorism financing (CFT) for crypto-asset service providers (CASPs). This initiative aims to bring current regulations in line with the evolving digital asset landscape and mitigate potential risks associated with crypto transactions.
Merging Criteria for Enhanced Compliance
In a consultation paper released on November 24, the EBA outlines its intention to merge the AML/CFT criteria for payment service providers (PSPs) and CASPs. This amalgamation is designed to create a more cohesive regulatory environment, ensuring that crypto providers adhere to robust standards in preventing money laundering and terrorism financing.
Focus on Protocol Interoperability and Self-Hosted Wallets
A significant aspect of the proposed guidelines is the emphasis on enhancing the interoperability of protocols used by CASPs. The EBA suggests that crypto providers should enable seamless and interoperable information transmission, a step that could streamline processes and improve regulatory compliance across platforms.
The new rules also propose stringent measures for self-hosted wallets. CASPs would be required to collect and maintain information on these wallets, ensuring that crypto-asset transfers are individually identifiable. Additionally, there would be a verification process to ascertain whether the address involved in a transfer is owned or controlled by the CASP customer. These requirements become applicable for transfers above the threshold of 1,000 euros, though the EBA has not specified the frequency (monthly, daily, or per transaction) for this limit.
Impending Implementation and Industry Feedback
Interested parties have until February 26, 2024, to provide their input on these proposed guidelines. Following the consultation phase, the EBA plans to enforce the new rules starting December 30, 2024.
Background and Context
These developments follow the EBA’s previous efforts in assessing the suitability of management body members in crypto-related entities and encouraging stablecoin issuers to adhere to guiding principles focusing on risk management and consumer protection. This proactive approach by the EBA reflects a growing recognition of the need for more rigorous regulatory oversight in the rapidly evolving world of cryptocurrencies, balancing innovation with the need for consumer and market protection.