How the AML Package will reshape the EU crypto market

The so called EU’s AML Package, a set of EU laws related to AML that is currently in its final stages of development entails substantial changes to the cryptocurrency market in Europe. In order to understand these changes, it is worth focusing primarily on two elements of the Package: (1) Regulation establishing the Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA) and (2) the recast of Regulation 2023/1113 on information accompanying transfers of funds and certain crypto-assets.

1. A Central AML Watchdog Emerges. AMLA will serve as a first unified EU AML regulator, directly overseeing selected entities and indirectly guiding national supervisors across the EU.

Direct supervisory powers

• The AMLA will have direct supervisory powers over selected highest risk groups and entities, including crypto asset service providers.

• On-site inspections and investigations: AMLA will be able to conduct inspections and investigate potential breaches of AML/CFT rules by directly supervised entities.

• The AMLA will be also equipped with the authority to impose fines on entities under its direct supervision.

Indirect supervision

• AMLA will develop and issue guidelines and standards for AML/CFT compliance that will include the crypto market , even for entities not directly supervised. This aims at creating a unified and consistent regulatory framework.

• AMLA’s aim is to facilitate cooperation and information sharing among national authorities, promoting coordinated action against financial crime within the crypto space.

2. Increased transparency. One of the intentions behind AMLA is that inadequate AML compliance has supposedly exposed the crypto-asset market to money laundering, aided by its inherent anonymity and decentralization.

In this regard, the AML Package:

• expands payment service providers’ duties to cover data on fund and certain crypto transfers, meeting FATF standards.

• mandates stricter standards for crypto-asset service providers, requiring them to collect information on both the originator and beneficiary of transfers.

• implements the Travel Rule for EU crypto transfers, with an aim to improve traceability and anti-money laundering efforts.

• implements a threshold for crypto firms to perform customer due diligence on transactions above €1,000.

• requires crypto firms to take measures to mitigate the risks of transactions involving self-hosted wallets and cross-border transfers.

Stay informed

The AML package is still under development, with final adoption expected in late 2024 and implementation by December 2024.