EU to Mandate Crypto Firms to Verify Clients for Transactions Over €1000

The EU Council and Parliament have provisionally agreed on a package of measures to combat money laundering and terrorist financing (AML/FT), which will tighten existing regulations for the crypto industry.

The agreement expands the list of entities subject to these regulations.

“The new rules will cover most of the crypto sector, requiring all service providers in the field (CASP) to conduct comprehensive checks on their clients. This means they will have to verify facts and information and report suspicious activity,” the press release states.

According to the statement, CASPs will be required to apply these measures for transactions of €1000 or more. Additionally, a strengthened due diligence regime is provided for cross-border correspondent relationships within the industry.

Among other sectors affected by the tightening of AML/FT regulations are luxury goods traders, including jewelers and watchmakers. The scope also includes the sale of luxury cars, airplanes, yachts, and art objects.

The agreement also recognizes the football sector as risky, thus professional clubs and agents are included among the “obligated entities.” However, due to significant differences in this industry between countries, the latter will have the right to make exceptions.

The EU authorities have also proposed a cash payment limit of €10,000. Enterprises will be required to identify and verify the identity of those who periodically conduct such transactions from €3000. Member states will have the option to set stricter limits.

The package of measures is aimed at approval by EU members. It is expected that the new regulations will come into force by 2029 at the latest.

Within the crypto community, the proposed rules have raised concerns that the AML/FT measures applied to industry participants will become stricter than those for the traditional financial market, reports CoinDesk.

“Despite the enthusiastic statements in the press by fellow lawmakers about this agreement, a level playing field has not been created, as the thresholds for CASPs and other financial institutions are not equivalent,” said Robert Kopitsch, Secretary General of the public organization Blockchain for Europe.

Experts also noted that NFTs are excluded from the proposed regulations. However, it remains unclear whether discussions will continue to include these assets in the final document. This also applies to transaction anonymization tools like Tornado Cash, which may be outlawed in the EU.

In April 2023, the EU Parliament passed a bill for comprehensive regulation of the crypto industry under MiCA.