The European Banking Authority (EBA) has made a significant move to strengthen Anti-Money Laundering (AML) measures by extending Travel Rules guidelines to include crypto service providers and their intermediaries.
Starting from December 30, crypto exchanges operating in the European Union will be required to adhere to Regulation (EU) 2023/1113 (Travel Rule guidelines), which mandates the reporting of information on transfers of funds and crypto assets.
This means that crypto asset service providers (CASPs) defined in the EU’s Markets in Crypto-Assets Regulation (MiCA) will now fall under the EU’s Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) regime.
Once the regulation comes into effect, payment service providers (PSPs), intermediary PSPs, CASPs, and intermediary CASPs will have a two-month grace period to declare their compliance with the new requirements.
Some of the general provisions include collecting users’ information for fund or crypto asset transfers, identifying transactions related to the purchase of services, and detecting suspicious transfers.
Additionally, crypto service providers and intermediaries will need to disclose their policies on multi-intermediation and cross-border transfers.
While the EBA recognizes that achieving compliance with the EU Travel Rule guidance may put financial strain on crypto exchanges and service providers, the regulatory agency expects long-term benefits.
Crypto exchanges and service providers that are already subject to the EU’s Anti-Money Laundering Directive (AMLD) or a domestic AML/CFT regime will continue to be bound by the applicable requirements.
Meanwhile, as European governments tighten their control over crypto exchange activities, crypto protocols are taking proactive steps towards compliance.
The Cardano Foundation, in collaboration with the Crypto Carbon Ratings Institute, has released sustainability indicators for the Cardano network that comply with the MiCA regulations in the EU.
The report highlights that Cardano operates on a more energy-efficient consensus protocol and consumes significantly less electricity compared to proof-of-work protocols.
It also provides important metrics such as the total annualized electricity consumption and carbon footprint of the Cardano network, as well as the marginal power demand per transaction per second.
In conclusion, the EBA’s extension of Travel Rules guidelines to include crypto service providers and their intermediaries is a significant step towards strengthening AML measures in the European Union. While compliance may initially pose financial challenges, the long-term benefits are expected to outweigh the costs. In the midst of increasing regulatory scrutiny, crypto protocols like Cardano are actively working towards compliance and sustainability.