To strengthen anti-money laundering (AML) measures
The European Banking Authority (EBA) published new guidance on the Travel Rule this month, extending the guidance to cryptocurrency service providers and their intermediaries.
From December 30 this year, cryptocurrency exchanges operating in the European Union will be subject to Regulation (EU) 2023/1113 (Guidelines on the Travel Rule), which requires relevant entities to report information on transfers of funds and crypto assets.
The new guidance outlines the necessary information that must be provided for a funds or crypto-asset transfer and details the steps that payment service providers (PSPs), intermediary PSPs (IPSPs), crypto-asset service providers (CASPs) and intermediary CASPs (ICASPs) should take to identify missing or incomplete information and what to do if a funds transfer or crypto-asset transfer lacks the required information.
The aim of the guidance is to create a uniform and effective approach to the application of the travel rule across the EU, enabling the relevant authorities to fully trace the movement of these funds or crypto-assets, where necessary, to prevent, detect or investigate money laundering and terrorist financing.
There is a 2-month buffer period
Cointelegraph reported that according to the definition of the EU Crypto Asset Market Regulation (MiCA), Crypto Asset Service Providers (CASPs) will be subject to the EU Anti-Money Laundering/Counter-Terrorist Financing (AML/CFT) framework. Once the regulations come into effect, PSPs, IPSPs, CASPs and ICASPs will have a two-month grace period to comply with the new requirements. The guideline states:
The deadline for authorities to report whether relevant entities have complied with the guidelines will be two months after the rules come into effect.
The regulations include collecting information on users' funds or crypto asset transfers, determining whether transactions are related to the purchase of services, and detecting potentially related transfer activities. In addition, cryptocurrency service providers and intermediaries will need to declare compliance with policies regarding multiple intermediaries and cross-border transfers.
The European Banking Authority admitted that compliance with the EU travel rule guidelines will put financial pressure on cryptocurrency exchanges and service providers, but in the long run, the overall benefits will be greater and will help to combat money laundering/terrorist financing more effectively.