In response to the recent legal settlement between Binance and the U.S. Department of Justice concerning anti-money laundering (AML) practices, the European Banking Authority (EBA) has proposed a set of stricter AML guidelines.
This move, announced on November 24, aims to bolster regulations within the cryptocurrency sector, targeting specifically the compliance challenges faced by crypto-asset service providers (CASPs) and payment service providers (PSPs).
EBA’s Proposed Guidelines Aim at Enhanced AML/CFT Standards
The European Banking Authority (EBA) has highlighted deficiencies in the existing regulatory framework for anti-money laundering (AML) and combating the financing of terrorism (CFT) among cryptocurrency providers.
To address these gaps, the EBA has introduced new guidelines, now open for public consultation until February 26, 2024. These guidelines particularly focus on crypto-asset service providers (CASPs) and payment service providers (PSPs), advocating for a unified approach to bolster AML/CFT compliance.
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The guidelines recommend specific measures to strengthen AML/CFT protocols. Key among these is the enhancement of interoperability in CASP protocols to facilitate the efficient exchange of information.
Additionally, the EBA advises CASPs to maintain comprehensive records on self-hosted wallet addresses, thus improving the traceability and identification of cryptocurrency transactions.
An important aspect of the guidelines is the establishment of a €1000 threshold for the examination of self-hosted wallet addresses. However, details regarding the frequency of such assessments have not been specified.
Balancing Innovation and Security in Crypto Regulations
The EBA has recently extended its regulatory efforts to stablecoin issuers, urging them to voluntarily comply with principles focusing on risk management and consumer protection.
As the cryptocurrency industry evolves, regulators globally are challenged to find a middle ground between fostering innovation and preventing financial crimes. The EBA’s new guidelines mark a critical step towards maintaining this balance, aiming to create a more secure and well-regulated cryptocurrency market.
In a related development, Binance, the leading cryptocurrency exchange by trading volume, has encountered sanctions from the U.S. Department of Justice (DoJ) for alleged violations of anti-money laundering regulations.
Binance CEO Resigns Amid DoJ Investigations and AML Allegations
The DoJ has disclosed an extensive five-year investigation into Binance, scrutinizing allegations of money laundering, illegal money transfers, and criminal sanctions violations.
In response to these accusations, Binance’s CEO, Changpeng Zhao, has stepped down from his role. Zhao also personally admitted guilt to charges related to the failure of establishing an adequate anti-money laundering framework, as stated by the DOJ.
The EBA, continuing its focus on regulatory reforms, anticipates the implementation of its new guidelines on December 30, 2024, following the conclusion of the public consultation process.
This development is part of the EBA’s broader initiative to revise and update regulatory standards in response to the evolving cryptocurrency market. This includes recent efforts to assess the suitability of management and shareholders within crypto-focused businesses.