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The EBA acknowledges that achieving compliance may financially strain crypto exchanges and service providers, but it expects the long-term benefits to outweigh the initial costs.
The European Union (EU) is ramping up its fight against money laundering and terrorist financing with the imminent enforcement of Travel Rule guidelines for crypto-asset service providers (CASPs). Announced by the European Banking Authority (EBA), these guidelines will become mandatory for all crypto exchanges operating within the EU by December 30, 2024.
Crypto AML/CFT Rules for CASPs
EU guidelines are a major step in integrating crypto activities into the EU’s existing Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) framework. Regulation (EU) 2023/1113, also known as the Travel Rule Guidelines, requires CASPs, as defined by the Markets in Crypto Assets (MiCA) regulation, to collect and report information on transfers of funds and digital assets.
CASPs must gather user data for transactions, identify service-related purchases, and detect potentially suspicious transfers. Crypto service providers and intermediaries must establish clear policies for handling multi-intermediated transactions and cross-border transfers.
The EBA acknowledges that achieving compliance may financially strain crypto exchanges and service providers, but it expects the long-term benefits to outweigh the initial costs. “These Guidelines are expected to contribute to making the fight against ML/TF more effective,” the EBA stated.
Crypto exchanges already subject to the EU’s existing Anti-Money Laundering Directive (AMLD) or similar domestic AML/CFT regimes will continue to operate under those regulations. The Travel Rule Guidelines add a layer of compliance specifically targeting digital assets transactions.
Cardano Meets MiCA Standards
As European governments tighten regulations, the crypto industry is taking proactive steps towards compliance. The Cardano Foundation, working with the Crypto Carbon Ratings Institute (CCRI), recently released sustainability indicators for the Cardano network that align with the upcoming MiCA regulation.
Cardano’s report highlights its energy-efficient consensus mechanism, which significantly reduces its electricity consumption compared to proof-of-work protocols. It also details the network’s total annualized energy consumption, carbon footprint, and marginal power demand per transaction.
This proactive stance from the crypto industry shows a willingness to collaborate with regulators and operate within a transparent and accountable framework. The December deadline for Travel Rule compliance will be a pivotal moment for the EU and the global crypto landscape, ushering in a new era of AML/CFT compliance for virtual assets transactions.
