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FameEX Hot Topics | European Banking Authority Launches New Consultation on Crypto Travel Rule
2023-11-28 16:10:21
The European Banking Authority (EBA) has initiated a consultation process aimed at implementing the "travel rule" for cryptocurrency transactions. This move is part of efforts to combat money laundering and terrorist financing in the crypto space. The EBA is soliciting feedback on procedures that cryptocurrency asset service providers (CASPs) should follow to collect necessary information for travel rule compliance. Additionally, the EBA seeks input on the actions CASPs should take when gathering this information is not feasible.
The travel rule is designed to prevent the misuse of funds and certain cryptocurrency asset transfers for illicit purposes, including money laundering and terrorism financing. The EBA's latest consultation builds on a previous effort in June, which focused on due diligence procedures for anti-money laundering measures. In a recent assessment of money laundering and terrorism financing risks, the EBA found that many European authorities consider the risks associated with CASPs to be significant or very significant. These risks are linked to various factors, including the pseudo-anonymity of cryptocurrency transactions, their connection to the dark web, involvement in predicate offenses like cybercrime and fraud, cryptocurrency investment scams, rising instances of money laundering, and evasion of sanctions. The EBA's guidelines exclude the application of the travel rule for transactions between unhosted wallets, as these do not involve the intermediation of a CASP. However, incoming transactions from an unhosted wallet to a wallet hosted by a CASP will be subject to the travel rule if the transaction amount exceeds 1,000 euros ($1,096). The proposed guidelines provide a framework for CASPs to determine if the user initiating a transaction controls both addresses involved. This involves employing various procedures, such as using advanced analytical tools, capturing photos or videos of the user, transferring a predefined amount to the CASP's account, signing specific messages within the account and wallet software, and requesting customers to digitally sign messages within the account and wallet software. CASPs are mandated to use at least two procedures to obtain the necessary data. However, if these methods fail to collect the required information, CASPs must implement additional processes to ensure compliance with the travel rule. The consultation process will be open for input and feedback until February 26, 2024. Stakeholders and industry participants are encouraged to participate in shaping the final travel rule procedures and compliance mechanisms. This effort underscores the ongoing regulatory scrutiny and evolving landscape for cryptocurrencies and their service providers in Europe. Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.
