Will EU’s Anti-Money Laundering Authority Scare Crypto Companies Away?

The European Parliament and the European Council have agreed to set up a new Anti-Money Laundering Authority in Frankfurt. The decision came following a 2023 EU decision to supervise crypto firms and financial services providers that operate internationally.

European Union (EU) authorities agree to institute an anti-money laundering watchdog in 2025 amid heightened scrutiny of the role of crypto firms in terrorist financing.

Why the European Money Laundering Focus?

The EU says its new anti-money laundering watchdog will have 400 staff when it launches in Germany next year. Nine countries, including France, Italy, Spain, Latvia, and Ireland, applied to host the agency.

The AMLA will require credit and financial institutions and crypto asset service providers to conduct customer due diligence. A crypto exchange must conduct due diligence to verify customer information and report suspicious activity to the EU’s Financial Intelligence Units. Last year, EU supervisory board member Elizabeth McCaul said it was important to consider an exchange’s global operations to assess its financial health since regulators looking only at local operations cannot accurately judge a firm’s risk.

A case in point was Binance, which French authorities investigated for money laundering. The US later charged the exchange for letting terrorists use its platform. However, a 2023 journal article in Oxford Academic said that while cryptocurrency can be attractive to terrorists, groups cannot often convert it to main currencies.