On 29 and 30 June, the EU reached provisional agreement on two areas of regulation of crypto assets to (1) extend anti-money laundering regulations (the "travel rule") to the transfer of crypto assets and (2) bring crypto-assets, crypto-assets issuers and crypto-asset service providers under a regulatory framework known as the Regulation on Markets in Crypto Assets (MiCA).

Transfer of Funds Regulation

The EU's proposal seeks to enable the traceability of crypto assets to prevent money laundering and other criminal activity by extending the "travel rule" already applicable in traditional finance to crypto assets. 

The proposal means that crypto asset service providers (CASPs) will be required to collect information about the source and the beneficiary of the transfers of crypto assets they operate and require such information travels with the transaction so it is stored on both sides of the transfer. 

Key elements of the regulation will include:

  • Requiring that, pre-transfer, CASPs verify that the source of the asset is not subject to sanctions or restrictive measures and there are no risks of money laundering or terrorist financing.
  • Requiring that CASPs implement appropriate internal policies, procedures and controls.
  • In a move away from the original proposal, there will be no exemption for low-value transfers or minimum thresholds.
  • Extending the rules to apply to transfers exceeding EUR 1000 in circumstances where a private unhosted wallet interacts with a wallet hosted by a CASP.
  • Preventing EU CASPs from trading with non-compliant and non-supervised CASPs by establishing a public register of such entities through MiCA.


In a bid to enhance protection for investors in crypto assets, MiCA seeks to provide a regulatory framework requiring CASPs to be authorised in order to operate in the EU. Key points to note from the proposals:

  • CASPs will be required to protect consumer wallets and may be held liable in the event that they lose investors' crypto assets.
  • A market abuse regime for crypto assets will be implemented under MiCA including market manipulation and insider dealing.
  • The European Banking Authority (EBA) will maintain a public register of non-compliant and non-supervised CASPs.
  • Stablecoin issuers operating in the EU will be required by the EBA to have a presence in the EU and maintain liquid reserves.
  • Non-fungible tokens (NFTs) will generally be excluded from scope (unless they fall under an existing crypto asset category) though the EU Commission will undertake a further assessment of whether a regime for NFTs is required.
  • Addressing environmental and sustainability concerns, operators in the crypto market will be required to declare information on their environmental and climate footprint.


At the same time EU officials were deep in discussion on these issues, I was co-chairing the Thought Leaders' Crypto in Disputes conference which covered topics ranging from digital asset fraud and recovery to smart legal contracts and international cooperation. The key theme that emerged from many of the conference sessions was that investors in the crypto space bear a disproportionate amount of risk and victims of crypto fraud face several obstacles in seeking to recover stolen crypto assets (such as cost and access to information). The decentralised and global nature of crypto assets and the crypto market means that fairly distributing risk and ensuring access to recourse would require international cooperation and standardised regulation as is only likely to be effective if it is adopted en masse  and on a global basis. The EU's proposed regulatory framework is therefore a step in the right direction, at least across its member states, but may also provide a useful reference point for other international regulators to hopefully bring us closer to a cooperative international approach that will make the crypto markets safer for all.

This regulatory framework will protect investors and preserve financial stability, while allowing innovation and fostering the attractiveness of the crypto-asset sector.


Originally Published 01 July 2022

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