EU Expands Travel Rule to Crypto Exchanges Under Regulation (EU) 2023/1113

• The European Banking Authority (EBA) has recently unveiled significant measures to reinforce Anti-Money Laundering (AML) controls by extending the Travel Rule guidelines to include crypto service providers and intermediaries.
• This regulation obligates crypto exchanges in the European Union to comply with Regulation (EU) 2023/1113, demanding detailed disclosures on fund and crypto asset transfers commencing December 30.
• “The deadline for competent authorities to report their compliance with the guidelines will be two months after the translations are published.”

A comprehensive overview of the European Union’s new AML regulations for crypto exchanges, emphasizing upcoming compliance requirements and their implications for the industry.

Legislation in the European Union

The Markets in Crypto-Assets Regulation (MiCAR) dictates that all crypto asset service providers (CASPs) must operate within the EU’s robust AML and Countering the Financing of Terrorism (AML/CFT) regulations. Following the enactment of this legislation, payment service providers (PSPs), intermediary PSPs, CASPs, and intermediary CASPs must confirm compliance with these regulations within a stipulated two-month period.

New guidelines necessitate the collection of user data for each fund or crypto transfer, clarifying the transaction details and identifying associated transfers. Additionally, crypto service providers and intermediaries are required to state their policies on complex intermediations and cross-border transfers.

Details of the New Regulations

The EBA acknowledges that adhering to the EU Travel Rule Guidelines may incur financial implications for crypto exchanges and service providers. However, the regulatory authority expects the long-term benefits to outweigh these costs, significantly enhancing AML/CFT efforts. Moreover, current AML/CFT regulations still apply to crypto exchanges and service providers already governed by the EU’s AML Directive or local frameworks.

As European regulators intensify scrutiny over the crypto exchange landscape, many crypto protocols are proactively introducing measures to ensure comprehensive regulatory compliance.

Key Takeaways for Crypto Stakeholders

For stakeholders within the crypto industry, several key points emerge:

• Crypto exchanges must be prepared to meet the new compliance standards by December 30.
• Service providers need to establish rigorous procedures for user data collection and transaction verification.
• Clearly defined policies addressing multiple intermediations and international fund transfers are critical.

The prompt adaptation to these regulatory changes is essential for crypto entities to navigate the evolving regulatory environment successfully.

Conclusion

In summary, the EBA’s recent announcement marks a significant shift in the regulatory landscape for crypto exchanges in the EU. With imminent compliance requirements, crypto service providers need to prioritize robust data collection and clearly documented transaction policies. By aligning with these changes, the industry can expect to enhance AML/CFT effectiveness and ensure sustainable growth within a more regulated framework.