The provisional agreement includes measure to expand the list of obliged entities to new bodies. The new rules will cover "most of the crypto sector, forcing all cryptoasset service providers (CASPs) to conduct due diligence on their customers. This means that they will have to verify facts and information about their customers, as well as report suspicious activity."

According to the agreement, "CASPs will need to apply customer due diligence measures when carrying out transactions amounting to €1000 or more. It adds measures to mitigate risks in relation to transactions with self-hosted wallets."

The Council and Parliament also introduced specific enhanced due diligence measures for cross-border correspondent relationships for cryptoasset service providers.

The article first appeared in Views – The Eurofi Magazine

The Opinion is issued against the background of a changed risk landscape, which has an impact on institutions’ AML/CFT compliance and competent authorities’ approaches to supervision. Examples include geopolitical events such as Russia’s invasion of Ukraine and legislative developments like  the publication of a comprehensive ‘AML Package’ and the Markets in Crypto-Assets Regulation (MiCA). They also include emerging risks such as corruption, and the laundering of proceeds from both environmental crime and cybercrime.

MiCA will enter into force on 29 June 2023 and will apply from 30 December 2024. However, the regulation will apply to e-money tokens and asset-referenced tokens from 30 June 2024.

The new transfer of funds regulation will also enter into force on 29 June 2023 and apply from 30 December 2024. 

The draft rules and guidance include specific information requirements on originators and beneficiaries of virtual asset transfers and the information requirements on virtual asset transfers of £1,000 (or equivalent value) or less, as indicated in the draft legislation.

Licensed VASPS are required to meet all the provisions within Schedule 3 and the associated rules in the Handbook. The chapter has guidance on how VASPS can apply a risk-based approach and comply with customer due diligence and enhanced customer due diligence measures.

This chapter also includes additional risk factors specific to virtual assets to help VASPs and other licensees which are not licensed as a VASP, but which have business connected to virtual assets, to identify, understand and mitigate specific risks attached to virtual assets when dealing with customers where there is a virtual asset connection.

See the draft legislation here.

See the proposed chapter on virtual sssets here.

The consultation also seeks comments on proposed additional rules and guidance for trustees of trusts and partners (excluding limited partners) of partnerships and limited partnerships without legal personality to hold information on the identity of other regulated agents and service providers to a trust or partnership, and disclose their status as trustee or partner. These rules will apply to licensed trustees and licensed partners.

Deadline for responses is 3 July 2023..

MiCA puts in place a comprehensive EU level legal framework for cryptoasset issuers and service providers including compliance with the anti-money laundering rules. The new rules cover issuers of utility tokens, asset referenced tokens and stablecoins. It also covers service providers such as trading venues and the wallets where cryptoassets are held. This regulatory framework aims to "protect investors, preserve financial stability, while allowing innovation and fostering the attractiveness of the cryptoasset sector."

The updated rules regarding transfers of funds extends the scope of the rules to transfers of cryptoassets. This ensures "financial transparency on exchanges in cryptoassets and provides the EU with a solid framework that complies with the most demanding international standards on the exchange of cryptoassets, ensuring that these are not used for criminal purposes." 

Under the new rules, cryptoasset service providers are obliged to collect and make accessible certain information about the sender and beneficiary of the transfers of cryptoassets they operate, regardless of the amount of cryptoassets being transacted. This ensures the traceability of cryptoasset transfers in order to be able to better identify possible suspicious transactions and block them.

MiCA provides new common rules on the supervision, consumer protection and environmental safeguards of cryptoassets, including cryptocurrencies. The draft law, agreed informally with the Council in June 2022, includes safeguards against market manipulation and financial crime.

MiCA will cover cryptoassets that are not regulated by existing financial services legislation. Key provisions for those issuing and trading cryptoassets (including asset-reference tokens and e-money tokens) cover transparency, disclosure, authorisation and supervision of transactions.  

The European Parliament also approved with 529 votes in favour to 29 against and 14 abstentions, the first piece of EU legislation for tracing transfers of cryptoassets such as bitcoins and electronic money tokens. 

The text, which was provisionally agreed by Parliament and Council negotiators in June 2022, aims to ensure that crypto transfers can always be traced and suspicious transactions blocked. The so-called 'travel rule' will cover transfers of cryptoassets. Information on the source of the asset and its beneficiary will have to 'travel' with the transaction and be stored on both sides of the transfer.

The texts will now have to be formally endorsed by Council, before publication in the EU Official Journal. They will enter into force 20 days later.