EBA proposes criteria to appoint a central contact point for crypto-asset service providers

EBA proposes criteria to appoint a central contact point for crypto-asset service providers

The European Banking Authority (EBA) has taken a significant step in the fight against money laundering and terrorism financing (AML/CFT) by proposing new draft Regulatory Technical Standards (RTS). These RTS outline the criteria for appointing central contact points (CCPs) for crypto-asset service providers (CASPs). This initiative aims to ensure compliance with local AML/CFT obligations and enhance regulatory oversight across the European Union.

Why Are Central Contact Points (CCPs) Important for CASPs?

Crypto-asset service providers often operate across multiple jurisdictions, leveraging decentralized and digital platforms. While this flexibility fuels innovation, it also introduces vulnerabilities, making these services potential targets for financial crime. CCPs act as a bridge between CASPs and host Member States, ensuring that CASPs adhere to local AML/CFT requirements, even when they operate outside of traditional branch models.

Key Highlights of the Draft RTS

Scope Expansion:
- The draft RTS extends the framework of Commission Delegated Regulation (EU) 2018/1108, originally applicable to electronic money issuers (EMIs) and payment service providers (PSPs), to include CASPs.
Criteria for CCP Appointment:
- A CCP must be appointed when CASP operations meet specific thresholds, such as cumulative transaction volumes exceeding €3 million per financial year.
- Host Member States may also require CCPs for operations deemed high-risk, regardless of transaction volume.
Functions of CCPs:
- Ensuring CASPs comply with local AML/CFT rules.
- Overseeing the implementation of AML/CFT policies and procedures.
- Reporting compliance issues to the head office and facilitating corrective actions.
- Representing CASPs in communications with host Member State authorities.
Alignment with Existing Frameworks:
- By building on the structure of existing regulations, the EBA minimizes disruption for EMIs and PSPs while addressing the unique risks associated with crypto-assets.

Implications for the Crypto Industry

The proposed RTS marks a pivotal moment for the crypto industry in the EU. With Regulation (EU) 2023/1113 set to take effect on December 30, 2024, CASPs must prepare to operate under a stricter regulatory environment. The appointment of CCPs will:

Enhance transparency and accountability.
Build trust with regulators and the public.
Strengthen the EU’s position as a leader in combating financial crime.

Public Consultation and Next Steps

The EBA has opened a public consultation on the draft RTS, inviting stakeholders to provide feedback until February 4, 2025. A virtual public hearing is scheduled for January 16, 2024, offering an opportunity to discuss the proposals further. The final report on the RTS is expected in Q2 2025, paving the way for full implementation.

Preparing for Compliance

CASPs should proactively review their AML/CFT policies and procedures to ensure alignment with the forthcoming RTS. Establishing robust internal controls and designating competent CCPs will be critical to maintaining compliance and avoiding potential penalties.

Conclusion

The EBA’s proposed criteria for appointing CCPs represent a critical step toward a more secure and compliant crypto-asset ecosystem in the EU. By bridging regulatory gaps and enhancing oversight, these measures will play a vital role in preventing money laundering and terrorist financing in the fast-evolving crypto sector.