EBA Expands AML Travel Rule Guidelines for Crypto Service Providers
The European Union (EU) is ramping up its efforts to combat money laundering and terrorist financing. On July 4, the European Banking Authority (EBA) announced new guidelines for crypto-asset service providers (CASPs) that will be enforced starting on December 30, 2024.
EBA’s Travel Rule Guidelines for CASPs
In a bid to enhance Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) measures within the EU’s cryptocurrency sector, the EBA has extended its Travel Rule guidelines to include crypto-asset service providers (CASPs) and their intermediaries.
These guidelines mandate that all crypto exchanges operating in the EU must comply with Regulation (EU) 2023/1113, which entails collecting and reporting information on fund and crypto asset transfers. The EBA’s guidelines, known as the Travel Rule Guidelines, align with the standards set by the Financial Action Task Force (FATF).
Based on Article 36 of Regulation (EU) 2023/1113 and Article 19a(2) of Directive (EU) 2015/849, the guidelines specify the information required for transfers of funds or crypto assets, including details about the sender and recipient. They will replace the Joint Guidelines under Article 25 of Regulation (EU) 2015/847, which outlined measures for payment service providers (PSPs) to detect and manage transfers lacking necessary information.
The aim of these guidelines is to prevent, detect, and investigate money laundering and terrorist financing activities. CASPs, as defined by the Markets in Crypto Assets (MiCA) regulation, must collect user data for transactions, identify service-related purchases, and flag potentially suspicious transfers. They are also tasked with establishing clear policies for handling multi-intermediated transactions and cross-border transfers.
The guidelines detail the steps that PSPs, intermediary PSPs (IPSPs), and CASPs should take to spot missing or incomplete information in transfers, as well as the actions to take if a transfer lacks the required details.
Financial Implications and Compliance
The EBA acknowledges that achieving compliance may pose a financial burden on crypto exchanges and service providers, but it anticipates the long-term benefits to outweigh the initial costs. Notably, crypto exchanges subject to the EU’s existing Anti-Money Laundering Directive (AMLD) or similar domestic AML/CFT regulations will continue to operate under those rules.
The Travel Rule Guidelines introduce a layer of compliance specifically aimed at digital asset transactions, ensuring that CASPs adhere to the same rigorous standards as traditional financial institutions. These guidelines will take effect on December 30, 2024, marking a significant milestone in the EU’s fight against financial crimes in digital assets.
As governments worldwide tighten regulations on crypto exchanges, the industry is actively working on compliance measures. For example, the Cardano Foundation has aligned its sustainability indicators with the upcoming MiCA regulation, emphasizing its energy-efficient consensus mechanism and commitment to transparency and accountability. Similarly, Circle, the organization behind USDC stablecoin, became the first global stablecoin issuer to secure an Electronic Money Institution (EMI) license under the European Union’s Markets in Crypto Assets (MiCA) regulatory framework on July 1.
