Yesterday Bloomberg reported that the European Union’s planned Anti-Money Laundering Authority (AMLA) would have oversight over cryptocurrency firms, citing insider sources. When the EU announced plans for the AMLA last July, it explicitly stated that its rules would fully apply to the crypto sector, far more broadly than at present. Bloomberg’s news is that the EU won’t just set pan-European rules for the cryptocurrency sector, but the new AMLA will directly supervise cryptocurrency institutions.
The July 2021 EU announcement stated, “At present, only certain categories of crypto-asset service providers are included in the scope of EU AML/CFT rules. The proposed reform will extend these rules to the entire crypto sector, obliging all service providers to conduct due diligence on their customers. Today’s amendments will ensure full traceability of crypto-asset transfers, such as Bitcoin, and will allow for prevention and detection of their possible use for money laundering or terrorism financing. In addition, anonymous crypto asset wallets will be prohibited, fully applying EU AML/CFT rules to the crypto sector.”
This statement was one of the main pillars of the new legislation. The other key goals of the legislation are to:
- provide a single EU Rulebook for AML/CFT
- directly supervise some of the riskiest financial institutions (hence cypto)
- coordinate with national supervisors and encourage cross border coordination
- create an EU-wide €10,000 limit on large cash payments.
Hence, direct supervision is likely to apply to cryptocurrency companies given they are treated as risky.
In the 2021 announcement, the plan was for the AMLA to start most activities in 2024 and begin direct supervision of “certain high-risk financial entities” in 2026. Hence it will be several years before this happens.
Meanwhile, the EU is also progressing its MiCA rules that cover cryptocurrencies and stablecoins beyond AML requirements. Plus, the EU is expected to finalize the law for its DLT pilot regime, which allows for security tokens to be traded by financial market instructures. It should come into force at the end of the year or early 2023.