• The European Parliament (EP) and the EU Council (EU Council) have reached an agreement on a regulatory package to combat money laundering that includes crypto.
  • Crypto firms are required to conduct due diligence on all transactions exceeding 1,000 euros.
  • Although the industry is generally satisfied with the outcome, some believe it may not have been as fair as the policymakers projected.

Crypto industry players are concerned that the new anti-money laundering regulations agreed by European Union policymakers will be more stringent than those that apply to traditional financial institutions.

This week, EU policymakers reached an agreement to create a comprehensive framework for anti-money laundering regulations that includes strict requirements on crypto firms.

According to the agreement, service providers must comply with strict customer verification requirements and take measures to reduce the risk of transactions involving cross-border transfers and self-hosted wallets.

The stated goal was to equalize the playing field between crypto firms and banks by applying the exact same rules. However, some in industry are concerned that the policymakers’ assertion that digital asset firms must undergo the same checks for money laundering as other financial institutions may be a little light on the truth.

Robert Kopitsch is the secretary-general of Blockchain for Europe, an industry advocacy group. “Despite the enthusiastic statements made by the co-legislators, this agreement has not created a level playing field, because the thresholds for crypto assets service providers and other institutions are not the same,” he said.

CoinDesk reported that the EU crypto industry lobbied hard to exclude non-fungible (NFT) tokens and decentralized (DeFi) finance from the scope of the package. They may even have managed – temporarily – to prevent restrictions on privacy enhancing tools.

Last year, the EU created history when it completed the first comprehensive crypto regulatory framework by a major jurisdiction. Along with its landmark Markets in Crypto Assets regulation (MiCA), the bloc set in place rules to gather information on crypto transfers as part of an Anti-Money Laundering Regulation.

Eero Heinaluoma said that while the AMLR package has not been finalized yet, the “main political principles” have already been agreed upon. This was revealed during a press conference held on Thursday by Eero, the Finnish member of European Parliament who is leading the negotiations.

Heinaluoma said that discussions about technical details of crypto-related measures will begin on Friday. Kopitsch claims this won’t be so much about tweaking the actual measures as it will be making sure the text is logical on a technical basis.

NFTs and DeFi are out. Privacy tools MIA?

Vyara Saviova, senior policy leader at the industry advocacy group EU Crypto Initiative said on a call held Wednesday that assets will likely remain out of the package.

Tommaso Astazi said that NFTs and decentralized finance (DeFi) will also likely be excluded from the scope of the regulatory packages.

“I believe we can be sure that the scope of the project has not increased.” Astazi, in an interview with CoinDesk on Thursday, said that the scope of MiCA is what applies. He explained that crypto service providers who are covered by MiCA are also subject to AMLR. Where they aren’t, as in the case of NFTs and DeFi, the measures do not apply.

After the Tornado Cash sanctions, there were fears the AMLR might outlaw or restrict the crypto anonymizing tools, as well as the fear that sanctioned entities such Russia would use crypto, stated Marina Markezic during a call on Wednesday.

Astazi stated on Thursday that it is unclear whether policymakers have continued to discuss these tools or if they will be included into the final text.

The same rules apply to banks and crypto firms

Heinaluoma himself said that the AMLR aims to treat crypto asset services providers as equally as credit institutions, with equal obligations.

Heinaluoma, who spoke at the press conference on Thursday, said: “The most important is that the same obligations are enforced now and in the future by the banking sector for crypto assets.

He added: “This is because we know a lot money is moving from traditional payments into the crypto area.”

Kopitsch says that the measures agreed upon apply different thresholds for crypto firms, cash transaction and financial institutions when applying customer due diligence.

Astazi stated that the legal texts indicate that, while all regulated companies must apply due diligence for transactions exceeding 10,000 euros, credit and financial institutions, as well as crypto firms, are required to perform full customer checks when transactions exceed 1000 euros.

Astazi says that this is the point where there are differences.

All occasional transactions (transactions that do not involve a business relationship) will be subject to basic Know-Your-Customer checks.

“They will still have to verify and identify the customer for occasional transactions.” Astazi said that this was a significant change. He added that firms are able to make these transfers in certain EU member countries because they don’t implement AML regulations uniformly.

Kopitsch said that imposing different thresholds shows “that the technological advantage of Blockchain technology has not yet been acknowledged.”

As an industry, we are able to accept the final result of the AMLR negotiation as its regulatory scope has been aligned with MiCA and TFR. Kopitsch said that this was the key.

Savova says that it is difficult to provide an exact time frame, but she expects technical discussions about the AMLR will be “quite intense” because policymakers want to have the package ready to go to Parliament for approval by April, before the upcoming elections.

Savova stated that the AMLR is now being developed at a faster rate for the representatives of the crypto-industry.

Before the regulatory package can go into effect, it must be adopted by Parliament and Council.

Nikhilesh De.