EU Mulling New AML Regulator To Oversee The Crypto Space

Table of Contents

• Significant Implications For Financial Institutions 
• A New Regulatory Body
• A Strict Approach To Crypto 

Significant Implications For Financial Institutions 

The crypto industry has been focused on the Markets in Crypto Assets regulation and the more controversial Transfer of Funds Regulation. However, these regulations are part of a much larger package of the EU’s new anti-money laundering (AML) policy, which is set to impact all financial institutions significantly. 

The regulatory body for cryptocurrencies is being created by the European Council, European Commission, and Parliament, which will have complete authority over the sector. The European Commission released its proposal for the Sixth Directive AML/CFT last July, while the European Council only released its version of the proposal only last month. The European Parliament will take it up after the August break. Once it passes its bill version, it will enter into negotiations with the European Council and European Commission. 

A New Regulatory Body

At its center, the new legislation has the creation of a new, EU-wide regulator for anti-money laundering. While the regulatory bodies still have to negotiate and reach common ground, there seems to be little disagreement between them about the need for such a regulator. There is also agreement that the new regulator should have direct and complete oversight over crypto and crypto asset providers operating in the European Union. 

The European Parliament has been aggressively pushing for the regulation of crypto. As a result, it is doubtful the body would oppose any future regulator or regulatory body’s complete supervision over the industry. 

The new regulator, called the “Anti-Money Laundering Authority” or “AMLA,” will look to monitor high-risk crypto firms. This differs from previous money laundering regulations that only provided the framework for EU nations to gather and share information. According to a parliamentary briefing, the new system has been described as follows, 

“EU-level supervision consisting of a hub and spoke model – i.e., supervisor at the EU level competent for direct supervision of certain financial institutions (FIs), indirect supervision/coordination of the other FIs, and a coordination role for supervising the non-financial sector as a first step.”

A Strict Approach To Crypto 

The European Union has taken a no-nonsense approach to crypto laws. The European Parliament had recently voted in support of anti-anonymity regulations designed to significantly increase the cost and difficulty of transactions between unhosted wallets and exchanges, making them nearly impossible. Furthermore, even if a law to completely ban Proof-of-Work mining was defeated by the legislative body, the European Central Bank believes such a ban would eventually occur thanks to growing environmental concerns. 

For the EU, creating a global organization marks a significant change. Previous AML directives required that member countries gather and make available required data, such as details about the beneficial ownership of corporations. Implementing the new regulations will depend on the pace of negotiations between the European Parliament, Commission, and Council, and it could be years before the regulations are fully implemented. 

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.