News Regulation

Europe tightens regulations in the crypto sector

The European Parliament decided to tighten regulations in the crypto sector. Crypto exchanges and wallet providers will be required to introduce customer due diligence procedures, including identity verification. The platforms will have to apply for registration in order to offer their services. The new measures come with the latest update of the EU Anti-Money Laundering Directive.

Members of the European Parliament supported on Thursday an agreement reached with the European Council in December to bring cryptocurrencies under closer regulation. This agreement represents the 5th and latest update of the EU Anti-Money Laundering Directive.

The amendments are aimed to address «risks linked to virtual currencies». Cryptocurrency trading platforms and custodian wallet providers will be required to introduce customer due diligence controls, including identity verification procedures. In the future, these businesses will apply for registration in order to offer regulated exchange and payment services.

The changes also target anonymity provided by payment card issuers. MEPs have approved the reduction of the threshold for identifying holders of prepaid and virtual cards – from the current €250 to €150. This will affect companies offering crypto to fiat conversion as part of non-custodial payment services.

Krišjānis Kariņš, co-rapporteur on the amendments, believes that  Criminals use anonymity to launder their illicit proceeds or finance terrorism. According to him, the new legislation will address the threats to the citizens by tightening rules regulating virtual currencies and anonymous prepaid cards. Judith Sargentini, his colleague added:

«We lose billions of euros to money laundering, terrorism financing, and tax evasion – money that should go to fund our hospitals, schools and infrastructure. We introduce tougher measures, widening the duty of financial entities to undertake customer due diligence. This will shine a light on those who hide behind companies and trusts and should keep our financial systems clean».

The updated Anti-Money Laundering Directive will come into force three days after its publication in the Official Journal of the European Union. Then, EU member-states will have 18 months to transpose the new rules into national law.