The European Banking Authority (EBA) recently announced updates to its Travel Rule guidelines, now including crypto service providers and intermediaries. This change, set to take effect on December 30, 2024, will require crypto exchanges in the European Union to adhere to the Travel Rule guidelines (EU-2023/1113). The new rule mandates that exchanges report information on funds and crypto asset transfers, providing specifics on the required information for transfers and outlining protocols for detecting and addressing missing data.
The EBA’s decision to expand the Travel Rule guidelines to include crypto service providers is part of the EU’s ongoing efforts to combat money laundering and terrorist financing. By ensuring the traceability of asset transfers, the EBA aims to facilitate investigations and make it more difficult for illicit funds to be transacted through crypto assets. Payment service providers (PSPs), intermediary PSPs, Crypto-Asset Service Providers (CASPs), and intermediary CASPs will have a two-month window to comply with the new guidelines once they are implemented.
In addition to reporting on funds and crypto asset transfers, the updated guidelines also require crypto service providers to gather user information to distinguish between service-related transactions and other transfers. Providers must also disclose their policies on cross-border transfers, adding an extra layer of security and transparency to their operations. The EBA believes that these measures will offer long-term benefits, ultimately supporting the EU’s Markets in Crypto-Assets (MiCA) regulation and streamlining regional regulations.
One of the primary objectives of the updated Travel Rule guidelines is to make it more challenging for funds and crypto assets to be used for terrorist financing and other financial crimes. By enabling authorities to fully trace transfers when necessary, the guidelines aim to prevent, detect, and investigate money laundering and terrorism financing. This proactive approach aligns with the EU’s broader goal of curbing illicit financial activities within the region.
The Travel Rule guideline update coincides with the impending second phase of the MiCA regulation. While the first phase, which focuses on stablecoins, is already in effect, the second phase targeting crypto asset service providers is set to commence by the end of the year. This regulatory evolution underscores the EU’s commitment to strengthening oversight of the crypto industry and ensuring compliance with anti-money laundering and counter-terrorist financing measures.