The European Parliament has recently passed new regulations that impose formal due diligence obligations on cryptocurrency firms to combat money laundering. These new rules aim to enhance "customer due diligence measures and identity checks" for customers, including crypto asset managers. These entities will also be required to report any suspicious activities to the authorities.

The new legislation, which was approved on April 24, will affect crypto-asset service providers (CASPs), such as centralized crypto exchanges, under the Markets in Crypto-Assets (MiCA) regulation. It will also impact other entities, including gambling services.

MiCA is a regulatory framework introduced by the European Union to regulate digital assets and their markets. It was enacted in June 2023 and will be fully enforceable by the end of the year.

The Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA) has been designated to oversee and supervise the implementation of the new rule. AMLA's office will be located in Frankfurt, Germany. However, the law has not yet been formally adopted by the Council and has not been published in the EU Office Journal.

Patrick Hansen, EU strategy and policy director at Circle, expressed his anticipation for the outcome of the vote on X. He mentioned that the package would proceed to be officially adopted by the Council of the EU and come into effect three years later.

Hansen noted that CASPs will be required to comply with standard Know Your Customer (KYC) and Anti-Money Laundering (AML) procedures, such as customer due diligence. He emphasized that this requirement is not new, as all crypto exchanges and custodial wallet providers in the EU are already required to comply with these regulations under existing legislation.

Hansen described the final version as a "positive result" for the crypto sector. He noted that earlier iterations of the proposed AMLR suggested a much stricter approach, which would have required KYC on the self-custody originator/beneficiary. However, he credited industry efforts for advocating a risk-based approach with multiple options, ultimately leading to consensus.

Last month, a majority of the European Parliament’s lead committees removed the 1,000-euro ($1,080) limit on cryptocurrency payments from self-hosted crypto wallets as part of new AML laws.