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European regulator issues guidance on cryptocurrency ‘travel rule’
The European Banking Authority (EBA) has released guidelines on the “Travel Rule”, i.e. the information that should accompany transfers of funds and certain cryptocurrencies, designed to combat the abuse of such transfers for the purposes of money laundering and terrorist financing.
The aim is to establish a coherent and effective approach to the implementation of the travel rule across the EU that allows competent authorities to fully trace such transfers where this is necessary to prevent, detect or investigate money laundering and terrorist financing.
New guidelines effective from 30 December 2024
These Guidelines repeal, with effect from 30 December 2024, the Joint Guidelines pursuant to Article 25 of Regulation (EU) 2015/847 on the measures that payment service providers should take to identify missing or incomplete information relating to the payer or the payee, as well as on the procedures they should implement to handle a transfer of funds without the required information.
The EBA is responsible for issuing guidelines to competent authorities, PSPs and CASPs on:
(a) the measures that such suppliers should take to comply with certain articles of Regulation (EU) 2023/1113;
(b) the technical aspects of the application of this Regulation to direct debits;
(c) measures, including criteria and means for identifying and verifying the identity of the originator or beneficiary of a transfer to or from a self-hosted address.
The “Travel Rule” guidelines specify:
- What information must accompany a transfer of funds or cryptocurrencies
- list the steps that Payment Service Providers (PSPs), Intermediary PSPs (IPSPs), Cryptocurrency Service Providers (CASPs) and Intermediary CASPs (ICASPs) should take to detect missing or incomplete information,
- what they should do if a funds transfer or cryptocurrency transfer does not contain the required information.
In June 2023, Regulation (EU) 2023/1113 entered into force, which aligns the EU legal framework with the Financial Action Task Force (FATF) standards by extending the obligation to include information on the payer and the beneficiary, the so-called “travel rule”, in CASPs.
The deadline for competent authorities to communicate whether they comply with the Guidelines will be two months after the publication of the translations in the official EU languages. The amending Guidelines will apply from 30 December 2024.
The EBA has also published Guidelines on risk-based AML/CFT supervisors of cryptocurrency service providers (CASPs) and Guidelines for cryptocurrency service providers to effectively manage their exposure to ML/TF risks, and is currently finalising work on the Guidelines on internal policies, procedures and controls to comply with the restrictive measures that apply to CASPs and other financial institutions.
Sumsub Published “Mastering Travel Rules Compliance”
Sumsub and Mercuryo have jointly published a paper entitled “Mastering Travel Rule Compliance” to provide guidance to Virtual Asset Service Providers (VASPs).
Designed to help cryptocurrency companies understand and implement the Travel Rule to ensure compliance and support business growth, the guidance is especially timely as the recent FATF survey revealed that 35 of 135 jurisdictions have already enacted Travel Rule legislation, with the European Union set to follow by December 30, 2024.
VASPs must respond to the growing global commitment to integrating cryptocurrency into regulated financial systems and ensure a safe, transparent and compliant environment. The guide addresses the complexity of regulation and provides practical solutions to remain compliant while minimizing costs and risks.
The Travel Rule, established by the Financial Action Task Force (FATF), requires financial entities involved in virtual asset transactions to collect and share personal information about both senders and recipients. This regulation is a critical component of anti-money laundering (AML) and counter-terrorist financing (CTF) efforts. It is essential that VASPs and financial institutions adhere to these guidelines to remain compliant, avoid sanctions, and maintain their licenses.