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FameEX Hot Topics | European Banking Authority Initiates Fresh Consultation on Cryptocurrency Travel Rule
2023-11-28 16:10:20
The European Banking Authority (EBA) has initiated a new consultation process aimed at implementing the "travel rule" for cryptocurrency transactions. The EBA is seeking feedback on the procedures that cryptocurrency asset service providers (CASPs) must follow to gather necessary information for travel rule compliance and the actions they should take when obtaining this information is not feasible.
The travel rule regulations are designed to prevent the misuse of funds and certain cryptocurrency asset transfers for money laundering and terrorist financing purposes. These rules complement a previous consultation process conducted by the EBA in June, which focused on due diligence procedures for anti-money laundering efforts. In a recent opinion regarding money laundering and terrorism financing risks, the EBA found that most European authorities consider the risks associated with CASPs to be significant or very significant. These risks arise from various factors, including the pseudo-anonymity of cryptocurrency transactions, their association with the dark web, use in predicate offenses like cybercrime and fraud, cryptocurrency investment scams, increased money laundering, and evasion of sanctions. The guidelines put forth by the EBA 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 guidelines outline a series of procedures that CASPs must employ to determine if the user initiating the transaction controls both addresses involved. These procedures may include using advanced analytical tools, capturing photos or videos of the user, transferring a predefined amount to the CASP's account, signing a specific message within the account and wallet software, and requesting the customer to digitally sign a message within the account and wallet software, among other actions. CASPs are required to utilize at least two procedures to obtain the necessary data. However, if they are unable to collect the information through these processes, they must employ additional methods to gather the required information. The consultation process will remain open until February 26, 2024, allowing stakeholders to provide feedback and input on these proposed travel rule procedures and compliance mechanisms. Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.
