The EU’s New Anti Money Laundering Regulation (AMLR): What You Need to Know
The crypto community recently experienced a wave of panic due to incorrect reports suggesting that the European Union (EU) was banning anonymous crypto wallets and self-custodial payments. However, these reports were based on a misinterpretation of comments made by Patrick Breyer, a member of the European Parliament, regarding the approval of the new EU Anti Money Laundering Regulation (AMLR).
Despite the misinformation, it is important to understand the actual implications of the AMLR for the crypto industry in the EU. Let’s delve into what this regulation entails and how it affects various aspects of the crypto space:
The Scope of AMLR
The AMLR is not specifically a crypto regulation; rather, it is a broad framework aimed at combating money laundering and terrorist financing. It applies to institutions classified as “obliged entities” or “OEs,” which include financial institutions, as well as crypto-asset service providers (CASPs) and other institutions vulnerable to anti-money laundering and counter-terrorist financing risks.
- Financial institutions and CASPs must follow standard KYC/AML procedures.
- Hardware and software providers, such as Ledger, are explicitly excluded from AMLR.
- Self-custody wallets, like MetaMask, that do not have control over users’ crypto assets are also exempt.
Implications for CASPs
CASPs, including centralized crypto exchanges and custodial wallet providers regulated under Markets in Crypto-Assets legislation (MiCA), will need to adhere to standard KYC/AML procedures like customer due diligence. However, they are already subject to these obligations under the existing AMLD5 legislation.
The AMLR now explicitly prohibits CASPs from providing anonymous accounts. This aligns with existing AML rules and does not introduce any new restrictions. However, non-KYC custodial Bitcoin Lightning wallets may be affected by this provision.
CASPs will also be prohibited from providing accounts for privacy coins, which is consistent with MiCA’s prohibition on crypto assets with built-in anonymization.
Transfers between CASPs and self-custody wallets will require “risk-mitigating” measures, such as blockchain analytics or collecting additional data about the origin or destination of the funds. This aligns with the Transfer of Funds Regulation (TFR), which implements the FATF travel rule in the EU.
Merchant Payments and Cash Restrictions
AMLR imposes a limit of β¬10,000 ($10,830) on cash payments in merchant transactions. However, there are no restrictions on using self-custodial wallets for buying goods or services in the EU.
If customers wish to use a CASP like BitPay to make purchases with crypto, the CASP must verify users’ identities and implement additional KYC/AML measures for transactions exceeding β¬1,000 ($1,083).
The Positive Outcome and Future Enforcement
The final version of the AMLR is considered a positive outcome for the crypto industry. Previous versions proposed stricter measures that could have had a more significant impact on self-custody payments. However, thanks to industry efforts, a risk-based approach was adopted instead.
The approved AMLR text is awaiting final formal approval in the European Parliament and the Council of the EU. It is expected to enter into application three years after publication, around summer 2027.
ESMA Progresses with MiCA Implementation
The European Securities and Markets Authority (ESMA) has taken steps towards implementing the Markets in Crypto Assets (MiCA) regulation. ESMA published its first report and launched a third consultation to gather feedback on rules related to market abuse prevention and service delivery in the crypto sector. The full enforcement of the MiCA framework is set for December.
Hot Take: Clarifying the EU’s AMLR Impact on Crypto
The recent panic surrounding the EU’s AMLR was based on incorrect interpretations of the regulation. While it imposes certain obligations on CASPs and limits cash payments, it does not ban self-custody wallets or P2P transfers. Understanding the true implications of this regulation is essential for navigating the evolving crypto landscape in the EU.
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