The European Banking Authority (EBA) has recently launched a new consultation process concerning implementing the so-called travel rule for cryptocurrency transactions. The institution is seeking feedback on the defined procedures that crypto assets service providers (CASPs) must complete to collect the needed information to comply with the travel rule, and the actions they must take when getting this information is not possible.
European Banking Authority Holds Consultation on Guidelines for Travel Rule Adoption
The European Banking Authority (EBA) has opened a new consultation that seeks to receive feedback on the procedures proposed to apply the travel rule to transfers that use wallets hosted by crypto asset service providers.
The rules are focused on “preventing the abuse of funds and certain crypto-assets transfers for money laundering and terrorist financing purposes” and complement another consultation process made by the institution in June that dealt with due diligence procedures for anti-money laundering processes.
In its most recent Opinion about money laundering and terrorism financing risks, the EBA found that most competent European authorities believe risks related to crypto assets service providers (CASPs) are significant or very significant.
These risks are derived from many factors, including “the pseudo-anonymity of transactions, the interaction with the dark web, the use of crypto-assets in predicate offenses such as cybercrime, complex fraud schemes, crypto-investment scams, increasing money laundering, and circumvention of sanctions.”
The presented guidelines leave out the application of the travel rule for transactions between unhosted wallets, given that these exclude the intermediation of a CASP. However, incoming transactions from an unhosted wallet to a wallet hosted by a CASP will have to comply with the travel rule if the amount involved is over 1,000 euros ($1,096).
The guidelines describe a set of procedures that CASPs must apply to determine if the user starting the transaction is in control of both addresses involved. These involve advanced analytical tools, taking photos or videos of the user, sending a predefined amount to the CASP’s account, signing a specific message in the account and wallet software, and requesting the customer digitally sign a message into the account and wallet software, among other actions.
CASPs should use at least two procedures to obtain the required data. Nonetheless, if CASPs cannot collect the information after these processes, they should leverage more processes to complete the required information.
The consultation will run until February 26, 2024.
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