Institutions in Europe have apparently reached a consensus on a set of regulations in the European Union applicable to crypto companies. They will be obliged to prevent illicit activities, such as money laundering, which could involve the use of digital assets. This progress comes as the EU is trying to introduce comprehensive regulation for overseeing the crypto industry throughout the continent.
AML measures for crypto space
Representatives of the European Council and the parliament that are part of the decision-making process in the European Union have come to an agreement in terms of crypto regulation. Entities operating in the crypto industry would have to comply with anti-money laundering (AML) rules, which means they will have to perform verification of the identities of their clients and also report any suspicious transactions.
Crypto transactions would also be covered by the Transfer of Funds Regulation (ToFR) in Europe. The relevant institutions in Europe have to finalize and approve the regulations in question, but the potential regulation shows that the sector is going to see some tightening. On Wednesday, the EU Council and the European Parliament dictated that crypto companies would have to collaborate with financial authorities to help them in cracking down against dirty money.
Impact of the regulation
According to an official statement, this improved oversight would allow regulators to be able to trace crypto transactions in the same way as traditional fiat transfers. Ernest Urtasun, a Spanish lawmaker, who was also involved in the process, said that the new rules would be of great use for law enforcement officials.
They would be able to use identify transactions related to criminal activities and also find the actual individual behind those transactions. It was further noted by the EU bodies that ‘unhosted’ crypto wallets would also be covered under the regulation. European officials use this term for referring to wallets that are not managed by a licensed platform and belong to private individuals. This would be applicable to transactions that are valued at more than €1,000 in fiat currency.
Crypto industry’s response
The crypto industry is certainly not happy with the announcement. Businesses that deal in crypto assets had sent a letter in mid-April to the finance ministers of all 27 of the member states in the European Union. In the letter, these entities had asked European policy makers to develop regulations that are in accordance with the standards of the Financial Action Task Force (FATF) in terms of money laundering.
Apart from this regulation, the European Union is also working on the development of a regulatory framework that would be applicable to other crypto-related activities. The discussion will be on the MiCA proposal i.e. Markets in Crypto Assets. EU states’ representatives and European Parliament members have to align their positions in regard to this legislation.
Once it goes into effect, which is expected to be at the end of next year, crypto companies will be given a duration of 18 months to apply for a license under MiCA in order to offer their services in the European Union.