New EU regulations mandate crypto exchanges to comply with Travel Rule guidelines, enhancing AML/CFT measures starting December 30.
In a significant move to bolster Anti–Money Laundering (AML) measures, the European Banking Authority (EBA) announced the extension of Travel Rules guidelines to crypto service providers and their intermediaries.
Crypto exchanges operating in the European Union (EU) will be subject to Regulation (EU) 2023/1113 (Travel Rule Guidelines) from December 30, which mandates reporting information on transfers of funds and crypto assets.
As a result, crypto–asset service providers (CASPs), as defined in MiCAR, will be subject to the EU’s Anti–Money Laundering/Countering the Financing of Terrorism (AML/CFT) regime.
Impact of EU Travel Rules on Crypto Exchanges
Once the regulation takes effect, payment service providers (PSPs), intermediary PSPs, CASPs, and intermediary CASPs will have a two-month grace period to comply with the new requirements.
According to the EBA, “The deadline for competent authorities to report whether they comply with the Guidelines will be two months after the publication of the translations.”
Some general provisions include collecting users’ information for the transfer of funds or crypto-assets, identifying if the transaction is related to the purchase of services, and detecting transfers that appear to be linked.
Additionally, crypto service providers and intermediaries will need to declare their policies on multi-intermediation and cross-border transfers.
Aiming for Long-Term Benefits
The EBA acknowledged that complying with EU Travel Rules guidelines will put financial pressure on crypto exchanges and service providers. However, the regulatory agency anticipates overall benefits in the long run.
“Overall, the benefits from these Guidelines are expected to outweigh potential costs, and these Guidelines are expected to contribute to making the fight against ML/TF more effective.”
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.”
Summary Review: Starting December 30, 2024, crypto exchanges in the EU will need to comply with new Travel Rule guidelines, extending Anti–Money Laundering (AML) and Countering the Financing of Terrorism (CFT) measures to the crypto sector. This regulation requires providers to report detailed information on transfers of crypto assets and funds, aiming to enhance transparency and combat financial crime. Although the new rules may put financial pressure on exchanges initially, the European Banking Authority (EBA) believes that the long-term benefits, including more effective anti-money laundering efforts, will outweigh the costs. Crypto service providers will need to adapt quickly to these requirements to ensure compliance and avoid potential issues.
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