AMLA: Europe’s Answer to Crypto Regulation and Anti-Money Laundering

  • AMLA will supervise compliance with anti-money laundering regulation 
  • It will ensure the transparency of crypto exchanges 
  • Regulation is seen as a double-edged sword 

What is the AMLA? 

The European Union and the European Council have created a new anti-money laundering watchdog- the Anti-Money Laundering Authority (AMLA) headquartered in Frankfurt, whose remit includes fighting illicit financial activities, money laundering, and terrorism financing within the EU. 

Whereas Brussels previously relied on national regulators to enforce rules, there will now be a pan-EU authority to supervise compliance with anti-money laundering regulations, bringing together the oversight of finance, including crypto, across the bloc. 

Who will AMLA affect? 

Credit and financial institutions that operate in six or more EU countries are set to fall under the watchful eye of the newly formed agency. AMLA will also cover cross-border activity. 

As a result, some large crypto asset service providers could be subject to direct supervision by the regulatory watchdog. Firms would need to ensure that their anti-money laundering practices and procedures comply with EU rules.  

AMLA & cryptocurrency 

In an effort to counter money laundering, the new AMLA rules aim to ensure transparency of crypto exchanges while also providing the EU with a solid framework for combatting money laundering, making it harder for crypto assets to be used for criminal purposes. 

Perhaps the most notable new rule will be that crypto service providers will be obliged to make crypto asset transfers traceable. This will be achieved by collecting and making accessible certain information about the sender and beneficiary of transfers, enabling the EU to identify and block any suspicious transactions. 

Crypto exchange and service providers will need to carry out customer due diligence to verify customer inflation and report suspicious activity to the EU’s Financial Intelligent Unit. 

How strict the AMLA will be on crypto remains to be seen and could depend on its leadership. A more innovative leader could adopt a soft stance. The AMLA’s general board will be made up of representatives from regulators and financial intelligence units of all member states. Meanwhile, the governing body will include the chair and five independent full-time members.  

The AMLA decision came after the EU ramped up its efforts to regulate the crypto space, finalizing the Markets in Crypto Assets (MiCA) in April 2023. This was the first EU crypto framework that came into force, Although the rules for “crypto asset service providers” don’t come into effect until the end of this year. 

What does this mean for crypto and the crypto industry? 

Regulation is a double-edged sword for cryptocurrency. On the one hand, regulation can bring legitimacy to the crypto space, protect consumers, reduce financial risk, and even attract more institutional players into the arena.  Under these circumstances, increased regulation is beneficial, and some more mature crypto companies even need new regulatory frameworks to grow their business. 

However, on the other hand, overbearing regulation could stall market growth and stifle innovation and the basic founding principles of decentralization that many in the crypto community believe fervently in. This could have the effect of scaring off potential investors. 

Sources 

https://www.dlnews.com/articles/regulation/european-aml-watchdog-will-supervise-crypto-from-frankfurt/ 

https://www.consilium.europa.eu/en/press/press-releases/2023/12/13/anti-money-laundering-council-and-parliament-agree-to-create-new-authority/ 

https://finance.yahoo.com/news/frankfurt-host-eu-money-laundering-195834914.html 

 

 

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