EU strengthens anti-money laundering rules for crypto companies to tackle illicit activities.
In a groundbreaking move, the European Union’s banking watchdog has stepped up efforts to combat financial crime in the cryptocurrency sector. The European Banking Authority (EBA) has issued new guidance mandating cryptocurrency companies to comply with strict anti-money laundering (AML) and counter-terrorist financing (CTF) measures.
EU Adopts Strong Regulations to Drive Cryptocurrency Adoption
A recent directive from the European Banking Authority (EBA) is designed to integrate cryptocurrency companies into the European framework for financial supervision. By expanding the scope of existing AML and CTF measures to cover the cryptocurrency sector, the EBA aims to ensure that Crypto Asset Service Providers (CASPs) across the EU mitigate the risks associated with financial crime. The urgency of these guidelines arises from the increasing use of cryptocurrencies to conduct illicit activities.
“For example, the speed of cryptocurrency asset transfers or the inclusion of features in some products that hide user identity may increase the risk of this happening,” the press release said. Therefore, it is important for CASPs to be aware of these risks and take steps to effectively mitigate them.”
Last year, the EU finalized legislation on fund transfers using digital assets with its comprehensive Markets in Cryptocurrency Assets (MiCA) regulatory package. Regulations require companies wishing to issue, trade and secure cryptocurrencies, tokenized assets and stablecoins within the 27-nation bloc to secure a license.
Ministers have taken proactive steps to address the potential misuse of crypto asset transfers for tax evasion and money laundering, making transactions easier to trace.
From January 2026, service providers will be required to collect the names of both sender and recipient for cryptocurrency transactions, regardless of the amount transferred.
The EU’s approach towards a risk-free cryptocurrency environment
The EBA has been actively publishing guidance for risk-based supervision of CASPs and consulting on proposals based on recommendations from the Financial Action Task Force (FATF), the global financial watchdog. This consultation also extends to guidance on the internal policies and control measures CASPs must implement. This move could create the most secure cryptocurrency environment.
The recent guidance has broader implications, extending to CASPs and credit and financial institutions dealing with crypto assets. Compliance reports will be submitted within two months of translation of the guidance and will come into force on 30 December. These EBA measures strengthen cryptocurrency market security, promote transparency, and address skepticism from traditional financial institutions.
“Considering the interdependence of the financial sector, the new guidance also includes guidance for other credit and financial institutions that have CASPs as customers or are exposed to cryptocurrency assets,” the EBA said.
In October 2023, the European Union introduced DAC8, a directive aimed at improving tax cooperation rules. The directive obliges cryptocurrency asset service providers (CASPs) to disclose their customers’ trading history to tax authorities, with a particular focus on reporting cryptocurrency transactions involving high-net-worth individuals.