The European Union (EU) has recently passed a new anti-money laundering regulation (AMLR) that will have implications for crypto-asset service providers (CASPs) and users alike. The regulation aims to enhance the ability of financial authorities to detect and combat money laundering and terrorist financing activities within the crypto space.

Key Provisions of the AMLR

1. Enhanced Due Diligence Measures Under the new regulation, CASPs, including crypto exchanges and brokers regulated under the Markets in Crypto-Assets Regulation (MiCA), will be required to implement enhanced due diligence measures. This means that obliged entities such as crypto-asset managers must report suspicious activities to Financial Intelligence Units (FIUs).

2. Customer Due Diligence for Transactions Individuals using CASPs for purchasing goods and services with cryptocurrencies will also be subject to customer due diligence. This involves verifying the identity of customers and potentially implementing additional Know Your Customer (KYC) and AML measures for transactions exceeding €1,000.

3. Establishment of AML Authority A new regulatory body called the Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA) will be established in Frankfurt to oversee the implementation of the new legislation.

Clarifications from Industry Experts

1. Misconceptions Dispelled Patrick Hansen, Circle’s EU Strategy and Policy Director, clarified that the new AMLR law is not specifically targeted at cryptocurrencies but is part of a broader framework aimed at combating money laundering and terrorist financing across financial institutions.

2. Continuation of Existing Rules Hansen noted that many of the provisions in the new law align with existing KYC/AML procedures mandated for CASPs. These include the prohibition of services to anonymous users and restrictions on providing accounts for privacy coins.

3. Removal of Proposed Restrictions While previous proposals included limitations on merchant payments from self-custody wallets, these restrictions have been removed from the final version of the regulation. As a result, users will be able to use self-custody wallets for purchasing goods and services in the EU without restrictions.

The EU’s new anti-money laundering regulation represents a significant step towards enhancing oversight and combating illicit activities within the crypto space. By imposing enhanced due diligence measures and establishing a dedicated regulatory authority, the EU aims to strengthen its efforts in safeguarding the integrity of the financial system. However, industry experts emphasize that the regulation builds upon existing rules for CASPs and dispel misconceptions about its impact on cryptocurrency usage.