EBA Proposed Criteria for Central Crypto Contact Points to Strengthen AML/CFT Framework

The European Banking Authority (EBA) released a public consultation paper on the draft “Regulatory Technical Standards (RTS)” that mandates “crypto-asset service providers(CASPs)” to appoint central contact points (CCPs) in host member states, to strengthen the fight against money laundering & terrorist financing.

CASPs may offer services in other Member States through facilities other than branches. Once created, CASPs must comply with local AML/CFT requirements, even if their premises are not ‘obliged entities’ themselves. This can make AML/CFT oversight of services offered by these organizations challenging.

Until 4 February 2025, the public consultation will be open, pushing stakeholders to provide feedback on the proposed RTS before this date.

In 2018, these benchmarks were set through (EU) 2018/1108, which cover Electronic Money Institutions (EMIs) & Payment Service Providers (PSPs). The recent adoption of (EU) 2023/1113 broadens the scope of Directive 2015/849 to CASPs from 30 December 2024. This requires an update to the current RTS.

Article 45(10) of the Directive requires EBA to develop an RTS that highlights criteria for central contact point (CCP) appointments and their functions. However, article 45(9) of the amended 4MLD allows the ‘Member states’ to require CASPs, EMIs & PSPs to appoint a CCP within their jurisdiction if they have a branch or head office in another member state.

Now, the EBA will revise Commission Delegated Regulation 2018/1108 to reflect these changes & ensure the enforcement of AML/CFT measures across the broad scope of regulated entities.

The EBA’s goal is to enhance the supervisory framework for cross-border CASP activities, ensuring a consistent and unified approach across the EU.

The central contact point -CCP will also act as local representatives to ensure compliance with the host country’s rules, even if the CASPs don’t count as “obligated entities”.

EBA also requires input from regulators and industry experts to ensure the practicality & effectiveness of new standards.

EU is also taking further steps to improve the management of cross-border payment service providers (PSPs), CASPs, and EMIs to strengthen AML/CTF in the jurisdiction.

EBA’s consultation requires feedback on the proposed criteria for analyzing when a CCP appointment is mandatory & the specific functions under which CCPs should perform.

Authorized EMIs, PSPs, and CASPs in member states can establish operations in other member states under existing EU regulations. Even if these establishments don’t directly adhere to AML/CFT obligations, they should conform to local laws.

Read Also

• Public Consultation Opens for AUSTRAC’s New AML/CTF
• UK and Cyprus Strengthen Alliance To Combat Russian Illicit Finance
• Vietnamese Tycoon “Truong My Lan” Faces Death Sentenced For $12 Billion Fraud Scandal

EBA has an agenda to minimize disruption to the market by identifying the similarities between EMIs, CASPs, and PSPs. The proposal suggests to:

• Retain the framework mentioned in Commission Delegated Regulation 2018/1108 while leaving provisions specific to EMIs & PSPs unchanged.
• Apply the regulatory framework to CASPs by introducing new provisions according to the advanced features & operational models.
• Include a definition of CASPs in Article 2 that will align with the concept in Article 3(2) of the Directive (EU).
• Expand the scope of “host member state” & “competent authority”.
• Extend the provisions highlighted in ‘Article 3(1), (2), and (4), Article 4, Article 5(a) and (c), and Article 6(1) and (2) related to CASPs’.
• Introduce certain criteria in Article 3(1) to understand when the appointment of a central contact point will be mandatory for CASPs. These criteria will be according to the scale & size of CASP activities under the host member state according to the nature of digital assets service described in ‘Recital 27 of the regulation (EU) 2024/1624’.

According to a press release, these proposals are necessary for a consistent & clear regulatory framework for CASPs in the EU to promote customer protection & market stability.