Crypto AML rules adopted by MEPs

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Members of the European Parliament’s Economic Affairs and Home Affairs Committees voted in favor of the anti-money laundering regulation, with 99 votes in favour, 8 against and 6 abstentions.

After weeks of back and forth between political decision-makers and stakeholders, the commission members agreed on their version of the text. The vote allows the files to enter the next stage of negotiations where the Parliament, the European Council and the European Commission must reach an agreement. The mandate to move forward will be announced at Parliament’s next plenary on April 17, but MPs can still challenge the decision within 24 hours.

For cryptography, the implications are manifold. On the one hand, decentralized autonomous organizations, NFT platforms and DeFi platforms will be subject to AML rules. They will be required to comply so long as they are controlled directly or indirectly, including through smart contracts or voting protocols, by identifiable natural and legal persons, according to a draft obtained by The Block.

Unlike the soon-to-be enforced European regulations on crypto-asset markets, the Anti-Money Laundering Bill includes decentralized platforms as obligated entities. The objective of the AML dossier is to fill the regulatory void.

“These categories will be obliged to carry out due diligence on all their customers and report suspicious transactions to the authorities, in the same way as banks, financial institutions or real estate agents, for example, currently do,” said a spokesperson for the Greens office. Party MEP Damien Careme wrote to The Block in an email. Careme is one of two policy makers leading the European Parliament’s negotiations on the AML package.

Commercial payment limits

If the regulation is passed, financial and credit institutions must apply due diligence measures when authorizing crypto transactions worth more than 1,000 ($1,080). Additionally, there are enhanced due diligence measures for correspondent relationships with non-EU crypto service providers and payments involving self-hosted wallets. Business relationships with unauthorized entities would be prohibited.

For commercial crypto payments, there would be a restriction on transactions worth more than 1,000 from self-hosted wallets, unless the owner of the wallet is identified. In an earlier version of the text, policymakers set the limit for merchants accepting payments from service providers not licensed by MiCA. Industry has pushed back on this, saying it would stifle innovation and stray from the regulatory path already set for the EU.

“Far from prohibiting all crypto transactions above a threshold of 1,000, this provision ensures that for self-hosted wallets, where identifying the owner is, by definition, very complicated, a limit is put in place. place,” Careme’s office wrote in the email.

The European Commission has a mandate to assess whether to adjust the rule on commercial payments in three years, in order to align with regulations, including the European Union’s digital identity framework and the new requirements proposed by the Anti-Money Laundering Authority.

Anonymous crypto accounts, as well as bank accounts, would be prohibited under the regulations. Other anonymization tools, including privacy wallets, mixers, and tumblers, are labeled as more risky. The Commission will also assess whether to ban them in the future.

A new anti-money laundering supervisor

In addition to the Anti-Money Laundering Regulation, the EU has also proposed the creation of a new Anti-Money Laundering Authority, which will oversee and enforce AML regulations across the 27-nation bloc, easing a part of the burden of national authorities. The proposal was adopted with 102 votes for, 11 against and 2 abstentions during the vote of the joint committee.

Although having an EU-wide AML authority would make it easier for crypto firms to navigate an otherwise fragmented set of national policies, some concerns remain. The AMLA would need sufficient resources to effectively oversee the crypto industry, multiple sources told The Block.

Isabella Chase, senior policy advisor at blockchain risk management and intelligence firm TRM Labs, is optimistic about the impact of the new watchdog. For crypto firms, the AMLA could be a great opportunity to be in the room with supervisors sharing their oversight experience and hopefully establishing useful best practices that can then trickle down to member states, a she declared.

Updated to reflect adoption of Anti-Money Laundering Authority proposal.

Updated after publication to clarify the EU procedure for approving the law.

2023 The Block Crypto, Inc. All rights reserved. This article is provided for informational purposes only. It is not offered or intended for use as legal, tax, investment, financial or other advice.

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