In a significant move aimed at combating money laundering, the European Parliament has endorsed new regulations that establish formal due diligence obligations for cryptocurrency companies. The adopted laws mandate enhanced due diligence measures and identity verification checks for entities involved in crypto asset management, including centralized crypto exchanges. Additionally, these firms are required to promptly report any suspicious activities to relevant authorities.

The scope of the new legislation extends beyond crypto-asset service providers (CASPs) to encompass various sectors, such as gambling services, as reported by The Block. Patrick Hansen, Circle's EU Strategy and Policy Director, anticipated the parliamentary vote's outcome, noting that the package will now undergo formal adoption by the Council of the EU before taking effect three years later.

Addressing recent speculation, Hansen clarified that the new laws do not entail a ban on anonymous crypto wallets or self-custodial payments. Instead, they apply primarily to CASPs already regulated under the Markets in Crypto-Assets Regulation (MiCA), a regulatory framework proposed by the European Union. MiCA, which governs digital assets and markets, became operational in June 2023 and will be fully enforceable by year-end.

According to Hansen, CASPs subject to MiCA must adhere to standard Know Your Customer (KYC) and Anti-Money Laundering (AML) procedures, including customer due diligence (CDD). He emphasized that these obligations are consistent with the current regulatory requirements under the Fifth Anti-Money Laundering Directive (AMLD5) applicable to all crypto exchanges and custodial wallet providers in the EU.

Overall, Hansen hailed the final version of the legislation as a positive outcome for the crypto industry, highlighting the adoption of a risk-based approach with flexible options. He underscored the collaborative efforts of the industry in advocating for a regulatory framework that balances regulatory compliance with innovation and growth opportunities.