The European Banking Authority (EBA) recently announced updates to its Travel Rule guidelines, which will now include crypto service providers and intermediaries. These changes are set to take effect starting December 30, 2024, and will impact crypto exchanges in the European Union.
Key Changes and Requirements
The updated guidelines require crypto exchanges to report information on funds and crypto asset transfers. This aims to enhance traceability of asset transfers for investigations related to money laundering and terrorist financing. In addition, the guidelines specify the information needed for transfers and outline procedures for detecting and addressing missing data. Payment service providers (PSPs), intermediary PSPs, Crypto-Asset Service Providers (CASPs), and intermediary CASPs will have two months to comply with these new requirements once they are implemented.
Competent authorities will be required to report whether they comply with the new guidelines within two months after the publication of official EU language translations. Crypto service providers must also gather user information to identify if transactions are service-related or linked to other transfers. Moreover, they must disclose their policies on cross-border transfers to ensure transparency and accountability.
The EBA argues that the updated Travel Rule guidelines offer long-term benefits by supporting the EU’s Markets in Crypto-Assets (MiCA) regulation and promoting unified regional regulations. The main objective of these guidelines is to make it more difficult to abuse funds and certain crypto-asset transfers for terrorist financing and other financial crime purposes. By enabling relevant authorities to fully trace such transfers, the guidelines aim to prevent, detect, and investigate money laundering and terrorism financing activities effectively.
The Travel Rule guideline update coincides with the approaching second phase of the MiCA regulation. While the first phase of the regulation, which focuses on stablecoins, is already in effect, the second phase targeting crypto asset service providers is set to begin by the end of the year. This signals a significant shift in regulatory oversight within the EU’s crypto industry.
The EBA’s updated Travel Rule guidelines represent a significant development in the oversight of crypto exchanges in the European Union. By enhancing transparency, traceability, and compliance within the industry, these guidelines aim to strengthen efforts to combat money laundering and terrorist financing activities effectively. Crypto service providers must prepare to adapt to these new requirements to ensure continued operations within the EU market.
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