New European ‘travel rules’ for cryptocurrencies to combat money laundering
The European Union (EU) is adding more layers to its crypto-related regulations to ensure that virtual digital assets (VDAs) are not misused by criminals to conduct or finance illicit activities. The European Banking Authority (EBA) has imposed a ‘travel rule’ on crypto companies that requires them to store details of transactions on their platforms, which is aimed at reducing cases of money laundering and terrorist financing using crypto assets – these transactions often leave no trail leading back to the perpetrators of the crime.
The EBA has made it mandatory for all crypto companies to disclose details of every transaction on their respective platforms, according to a rack released by the supervisory authority earlier this month.
EBA Travel Rules Guidelines
Under the new guidelinesCrypto companies in the EU have been instructed to collect and retain payer and payee data for all transactions. The travel rule applies to all companies operating within the EU region, which are required to confirm their compliance. Companies requesting an exemption must provide reasons to the authorities who will be assessed.
Crypto companies that fail to comply with this law without notifying the authorities will be classified as ‘non-compliant’ and may face legal action. Companies related to crypto finance have been instructed to adjust their policies to align with the EBA’s travel rule, which already applies to the traditional banking sector.
The guidelines have been expanded and will come into effect on December 30.
The EU crypto rules
The EBA is also working with EU policymakers to bind the volatile and financially risky crypto sector to a solid legal framework. This is expected to make the crypto sector safer for exploration by investors, without posing a risk to the financial stability of the EU. At the same time, crypto operators are being tackled.
Earlier in June, the EBA published the final draft technical standards that will define the rules for Markets in Crypto Assets (MiCA). The EBA addressed a number of issues in its final draft technical standards, including those related to liquidity requirements, stress testing programme, asset reserves and recovery plans.
In October 2022, the EU adopted its MiCA legislation, which aims to protect consumers, prevent market manipulation and reduce financial crime related to digital assets in the EU.
