The European Parliament recently adopted a new Anti-Money Laundering (AML) law package that significantly impacts crypto asset service providers (CASPs) in the region. The new laws increase reporting requirements for CASPs when sending and receiving ‘anonymous’ payments between self-hosted wallets and custodial service providers. Additionally, the legislation imposes limits on cash transactions and establishes a central watchdog agency to develop regulatory technical standards.
Under the new laws, EU CASPs must conduct customer due diligence on transactions originating from self-custodial wallets for transactions below 1000 EUR. For transactions above 1000 EUR, additional Know Your Customer (KYC) measures must be implemented. The laws also regulate the operation of no-KYC custodial software service providers and ban CASPs from offering privacy assets, while exempting self-custodial software and hardware providers from the regulations.
The European Parliament’s resolution assumes that the anonymity associated with certain electronic money products and crypto-assets exposes them to money laundering and terrorist financing risks. However, despite claims that cryptocurrencies are being increasingly used for illicit purposes, there appears to be a lack of concrete data supporting these assertions.
The new law package aligns EU AML/CFT frameworks with updated recommendations from the Financial Action Task Force (FATF), an intergovernmental body established to combat money laundering and terrorist financing. However, reports from FATF regional bodies and other organizations seem to lack conclusive evidence on the significance of cryptocurrencies in AML/CFT efforts.
Experts warn of the potential impact of cryptocurrency deanonymization tactics on fundamental rights, such as privacy and freedom of expression. As the EU implements these new AML laws, questions arise about the proportionality of the regulations in relation to the lack of verifiable data on the role of cryptocurrencies in illicit transactions.
Overall, the adoption of the new AML law package by the European Parliament raises important questions about the effectiveness and necessity of these regulations in combating money laundering and terrorist financing in the crypto space.
