Saturday, July 20, 2024

The European Banking Authority (EBA) has initiated a fresh consultation aimed at the implementation of the travel rule in cryptocurrency transactions. This process involves gathering input on the specific protocols that crypto asset service providers (CASPs) must adhere to in order to gather necessary details for complying with the travel rule. The consultation also addresses the steps to be taken when such information acquisition proves unfeasible.

European Banking Authority Commences Deliberation on Implementing Travel Rule Guidelines

The European Banking Authority (EBA) has commenced a consultation to solicit opinions on the proposed methodologies for enforcing the travel rule in transactions involving crypto asset service providers’ hosted wallets.

These regulations aim to “curb the misuse of funds and certain transfers of crypto-assets for activities like money laundering and terrorist financing,” further building upon a previous consultation by the EBA in June. This earlier consultation focused on due diligence measures for anti-money laundering initiatives.

In its latest assessment concerning the risks of money laundering and terrorism financing, the EBA observed that many competent European authorities perceive the risks associated with CASPs as considerable or extremely high.

These risks stem from various factors, such as “the semi-anonymous nature of transactions, interactions with the dark web, use of crypto-assets in preliminary criminal activities like cybercrime, elaborate fraud schemes, crypto-based investment scams, growing instances of money laundering, and evasion of sanctions.”

Specifics of the Guidelines

The proposed guidelines do not apply the travel rule to transactions between non-custodial (unhosted) wallets, as these do not involve a CASP. Nonetheless, incoming transfers from an unhosted wallet to one managed by a CASP must adhere to the travel rule if the transaction exceeds 1,000 euros ($1,096).

The guidelines lay out various procedures for CASPs to verify whether the initiator of a transaction controls both involved addresses. These procedures include utilizing sophisticated analysis tools, capturing photographs or videos of the user, sending a predetermined sum to the CASP’s account, signing a particular message using account and wallet software, and requiring the customer to digitally sign a message within their account and wallet software, among other steps.

CASPs are expected to employ a minimum of two methods to gather the requisite data. If CASPs are unable to acquire the necessary information through these methods, they should implement additional procedures to fulfill the information requirements.

The consultation period is set to conclude on February 26, 2024.

What are your views on the EBA’s consultation regarding the travel rule procedures? Share your thoughts in the comment section below.

Frequently Asked Questions (FAQs) about EBA Crypto Travel Rule

What is the European Banking Authority’s New Consultation About?

The European Banking Authority (EBA) has launched a new consultation to implement the travel rule for cryptocurrency transactions. This involves collecting feedback on procedures for crypto asset service providers (CASPs) to comply with the rule, especially when acquiring necessary transaction information is challenging.

What are the Main Goals of the Travel Rule in Crypto Transactions?

The travel rule aims to prevent the misuse of funds and crypto-assets in money laundering and terrorist financing. It requires CASPs to collect and share specific information about the parties involved in cryptocurrency transactions.

How Does the EBA View the Risks Associated with CASPs?

The EBA considers the risks related to crypto asset service providers (CASPs) as significant or very significant. This perspective is due to factors like the semi-anonymous nature of transactions, the use of crypto-assets in criminal activities, and the potential for money laundering and sanction evasion.

What Transactions are Exempt from the Travel Rule According to the EBA’s Guidelines?

Transactions between unhosted (non-custodial) wallets are exempt from the travel rule, as they do not involve a CASP. However, transactions from an unhosted wallet to a CASP-hosted wallet exceeding 1,000 euros must comply with the rule.

What Methods Must CASPs Use to Comply with the Travel Rule?

CASPs are required to use at least two verification methods to comply with the travel rule. These methods include advanced analytics, photo or video verification of users, small test transactions, and digital message signing in both the account and wallet software.

What is the Deadline for the EBA’s Consultation on the Travel Rule?

The consultation period for feedback on the EBA’s proposed travel rule guidelines will end on February 26, 2024.

More about EBA Crypto Travel Rule

  • European Banking Authority Official Website
  • Overview of the Travel Rule in Cryptocurrency
  • Risks in Crypto Asset Service Providers
  • Anti-Money Laundering in Cryptocurrencies
  • Consultation Procedures and Guidelines
  • Understanding Cryptocurrency Regulations in Europe
  • Deadline for EBA’s Travel Rule Consultation Feedback


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RegulationWatcher November 28, 2023 - 11:52 pm

This is a much-needed move, especially with all the scams and dark web stuff. Still, not sure if this will be effective enough or just add more red tape…

CryptoGuru November 29, 2023 - 12:48 am

interesting to see EBA stepping up on crypto regulations, though I’m concerned about how this might stifle innovation. gotta find a balance, right?

FinanceGeek November 29, 2023 - 2:39 am

Good article, but how are CASPs supposed to implement all this? seems like a logistical nightmare, especially for smaller players in the market.

SatoshiFan101 November 29, 2023 - 12:17 pm

always the same with these institutions, trying to control everything. crypto is about freedom, not being watched over by big brother all the time.


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