Europe issues ‘travel rules’ guidelines for cryptocurrency businesses as part of efforts to combat money laundering and financial crime

The European Union (EU) is tightening its cryptocurrency regulations to ensure that virtual digital assets (VDAs) are not misused by criminals to conduct or finance illicit activities. The European Banking Authority (EBA) has imposed a “travel rule” on cryptocurrency businesses that will require them to store transaction details on their platforms, in a move aimed at reducing instances of money laundering and terrorist financing using crypto assets – these transactions often leave no trace leading to the perpetrators of the crime.

The EBA has made it mandatory for all cryptocurrency businesses to disclose details of each transaction on their respective platforms, in line with a statement published by the regulator earlier this month.

EBA Guidelines on Travel Rules

Under the new guidelinesEU cryptocurrency businesses have been instructed to collect and maintain records of payers and payees of all transactions. The travel rule applies to all businesses operating in the EU region, which will be required to confirm their compliance. Businesses requesting an exemption must provide reasons to the authorities who will be assessed.

Cryptocurrency businesses that fail to comply with the law without informing authorities will be categorized as “non-compliant” businesses and could face legal action. Cryptocurrency finance-related businesses have been asked to amend their policies to be in line with the EBA’s travel rule, which already covers the traditional banking sector.

The guidelines are complete and will come into effect on December 30.

EU rules on cryptocurrencies

The EBA is also working with EU policymakers to bring the volatile and financially risky cryptocurrency sector into a robust legal framework, a move that should make the cryptocurrency sector safer for investors to explore, without posing a risk to the EU’s financial stability and while cracking down on cryptocurrency miners.

In early June, the EBA published the final draft of the technical standards that will govern its rules on markets in crypto assets (MiCA). address a number of issues in its final draft technical standards, including those related to liquidity requirements, the stress testing program, asset reserves and recovery plans.

The EU approved its MiCA legislation in October 2022, aimed at ensuring consumer protection, preventing market manipulation and curbing financial crimes related to digital assets in the EU.

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