Blockchain & Crypto

EU Approves Due Diligence Obligations For Crypto Companies Under MiCA

According to the new EU laws, crypto asset managers will be required to conduct due diligence measures and identity checks and report any suspicious activities to authorities.

EU Approves Due Diligence Obligations For Crypto Companies Under MiCA

The European Parliament approved new legislation on April 24. It will impact crypto-asset service providers (CASPs) regulated under the Markets in Crypto-Assets (MiCA) framework and other entities, e.g. gambling services.

The law obliges CASPs to adhere to standard Know Your Customer (KYC) and Anti-Money Laundering (AML) procedures such as customer due diligence. The approved version is quite favourable for the crypto service providers, as it doesn’t require more than existing financial regulations.

Earlier iterations of the proposed requirements were much stricter, with the required KYC procedure on the self-custody originator/beneficiary. Now, transfers between CASPs and self-custody wallets will incur milder “risk-mitigating” measures, like the use of blockchain analytics or the collection of additional data about the origin/destination of crypto-assets involved.

The legislators reinstated the prohibition for CASPs to provide anonymous accounts, which is not a novel requirement. Also, CASPs will not be allowed to provide accounts for privacy coins – a type of cryptocurrency designed to conceal transactions and trader identities. MiCA already prohibits the listing of crypto-assets with built-in anonymisation functions, consistent with existing business practices worldwide.

Previously, the Parliament also proposed limiting merchant payments from a self-custody wallet (without CASPs involved) to 1k €. This proposal has been removed from the final adopted version.

MiCA is a legislative framework introduced by the European Commission last year to ‘harmonise’ the regulation of crypto markets within the European Union (EU). The framework will be fully enforceable by the end of this year.

A newly created agency, the Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA), will oversee the implementation of the new rules.

Nina Bobro

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Nina is passionate about financial technologies and environmental issues, reporting on the industry news and the most exciting projects that build their offerings around the intersection of fintech and sustainability.