By 2027, the European Union (EU) is set to use its Anti-Money Laundering regulations (AMLR) to ban privacy cryptocurrencies (crypto-asset accounts allowing anonymization of transactions) and anonymous accounts (accounts using anonymity-enhancing coins).
This is interpreted by observers to be defined in the Markets in Cryptao-Assets Regulation (MiCA).
The European Crypto Initiative (EUCI) has come out with its “AML Handbook” focusing on how AMLR obligations affect crypto asset service providers (CASPs), as well as financial and credit institutions.
These “strict” prohibitions are contained in AMLR Article 79, the key takeaway being that they will be banned from any handling of anonymous accounts.
There is little room, if at all to change the framework, and reportedly only on the surface level, without affecting the gist of the legislation.
And this is a set of rules, including AMLR (as well as Anti-Money Laundering Directive, AMLD, and Anti-Money Laundering Authority Regulation, AMLAR).
The “wiggle room” is now by and large contained in the powers of the European Banking Authority that is in charge of implementing and delegated acts – which is taken to mean that some details still need to be ironed out still, for CASPs’ full harmonization to be defined.
Once the rules are officially final, the EU requirement will be for any CASPs present in at least six of the bloc’s member countries -in a way that is “substantial” – to be fully subjected to direct AMLR supervision.
On July 1, 2027, 40 firms will be chosen (at least one per EU member) for supervision. The “substantial” operational ability here means at least 20,000 customers in a member country – alternatively, a CASP firm eligible to fall under the rules will have to have $56 million or more transaction volume.
Meanwhile, customer due diligence will apply to all transactions higher than the euro equivalent of $1,100.
The overarching thinking behind the policy here is that Decentralized Finance (DeFi) platforms have proven to be fertile ground for criminals – and, specifically, money laundering (from crypto to fiat money).
But this is happening even though the actual level of money laundering via crypto compared to fiat remains negligent – not to mention, requiring significantly more involvement from bad actors.