New legislation passed by the European Parliament will subject crypto-asset service providers (CASPs) to government monitoring, aiming to enhance due diligence measures and identity verification for consumers. Approved on April 24, this law falls under the broader Markets in Crypto-Assets (MiCA) regulation, established by the European Commission last year to govern cryptocurrency assets within the European Union, with a focus on investor protection and financial stability.

Under the new law, CASPs, including cryptocurrency exchanges, will be mandated to identify and report suspicious activities to authorities. Additionally, it introduces the creation of the Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA), headquartered in Frankfurt, Germany, to oversee regulatory compliance.

EU strategy and policy director at Circle, Patrick Hansen, clarified that CASPs will be required to comply with Know Your Customer (KYC) and Anti-Money Laundering (AML) procedures, enabling crypto users to utilize these platforms for transactions exceeding EUR 1000. While this may facilitate crypto-powered microtransactions in the EU, Hansen noted that existing regulations already mandate compliance for wallet providers and exchanges.

Hansen emphasized that the law, set to be adopted by the Council of the EU and enforced within three years, represents a positive outcome for the cryptocurrency sector, providing clarity and regulatory framework for an industry that has operated in a gray area.