December has seen a flurry of crypto-related regulatory activity, mostly dominated by the EU authorities. As the world awaits the US change in power and its potential impact on crypto regulation, this year wraps up with the EU as the main standard-setter in the industry. 

European Union

1. MiCA licensing requirements and Travel Rule fully apply to EU CASPs as of 30 December 2024

To clarify crypto regulations, the European Banking Authority (EBA) has released an explainer. It summarizes the key regulatory milestones and guidance for CASPs in the EU.

A quick summary of the requirements for EU CASPs:

• CASPs issuing both asset-referenced tokens (ARTs, tokens pegged to assets) and e-money tokens (EMTs, tokens used to transfer value, similar to e-money) must be authorised (i.e., licensed) to operate in the EU. MiCA (Markets in Crypto-Assets Regulation) outlines the main principles, while individual EU member states specify licensing regimes and requirements.
• Compliance with EU AML/CFT rules after obtaining a licence.
• Ensuring AML/CFT risks have been assessed and mitigated is also a requirement for ART issuers who are not CASPs.
• Complying with the Travel Rule requirements, i.e., including required information on the originator and beneficiary of crypto asset transfers. CASPs also have to apply specific measures to crypto asset transfers involving self-hosted addresses.

With compliance tools in place, adherence to these rules is faster and easier. For example, the GL Counterparty Report provides data on both the use of funds and the source of funds. 

By clicking on any entity, you will be directed to its dedicated page in the Entity Explorer, a one-page overview of an entity.

2. CASPs already operating in the EU can work under a “grandfathering regime” 

CASPs already operating in the EU before 30 December 2024 can keep running their businesses until 1 July 2026 (or a deadline set by national regulators, whichever is earlier) while they work on getting fully licensed under MiCA. This is the so-called grandfathering regime.

These CASPs are obliged to ensure AML/CTF measures under the EU Anti-Money Laundering Directive (AMLD) in addition to complying with the Travel Rule.

GL Counterparty Report with data on sanctioned and other high-risk entities often involved in money laundering and other illicit activities  

The grandfathering regime applies to a wide range of CASPs already operating in the EU. This includes those involved in issuing, offering to the public, admitting crypto assets to trading, and providing services related to crypto assets—not just custodial wallet providers and crypto-fiat exchanges, as outlined in earlier AMLD crypto rules.

Check out the European Securities and Markets Authority (ESMA) list of the grandfathering periods set by EU member states. 

According to the list, the shortest transition periods are in Lithuania (5 months) and Latvia, Hungary, the Netherlands, Poland, Slovenia, and Finland (6 months). The longest period, 18 months, applies in Czechia, Denmark, Estonia, France, Croatia, Cyprus, Luxembourg, Malta, and Romania.

Member states can choose not to apply the grandfathering regime or shorten its duration. 

What is the impact on crypto firms?

Crypto firms need to determine if the grandfathering regime applies to them and, if it does, what their specific timeline is. This depends on the EU country they operate in, whether they were active there before 30 December 2024, and the type of services they offer. Firms should pay close attention to the different deadlines for applying for a full licence. In some countries, CASPs must submit their licence applications by specific dates to qualify for grandfathering—such as 30 December 2024 in Denmark or 31 July 2025 in Czechia.

3. CASPs operating in multiple countries must take into account different transition periods

According to ESMA, CASPs operating in multiple countries, must work with local authorities to ensure compliance, as different regulators can set varying transitional periods.

For example, one country allows 12 months (Member State A) but another allows only 6 months (Member State B). If the CASP gets authorization in Member State A (and passporting rights in the EU) after the 6-month transitional period in Member State B, it might be unable to serve clients in Member State B. Given the potential disruption, CASPs should take all necessary steps to protect their clients, market participants, and market integrity, and adhere to AML/CFT requirements. 

What is the impact on crypto firms? 

Crypto firms need to review the transition periods in all the EU countries where they operate and work closely with the relevant national competent authorities. This helps them address the impact on their authorization status, passporting rights, and their customers and partners.

4. Removing inconsistencies created by the dual application of both MiCA and PSD2 is expected

Under MiCA, EMT issuers require authorization, but some CASP activities involving EMTs might also fall under PSD2 as payment services. This could require additional PSD2 authorization, increasing the regulatory burden on CASPs and national authorities and leading to regulatory loopholes. 

The EU Commission clarified that CASPs offering EMT-based payment services must either obtain PSP authorization or work with an authorised PSP. It’s generally required for third-party or peer-to-peer (P2P) payments. However, CASPs acting as buyers or sellers of EMTs in their own name, without facilitating payments between a payer and payee, generally do not need PSP authorisation.

In some cases, EMTs used for investment or trading rather than payments may unintentionally fall under PSD2 rules, creating unnecessary challenges. The Commission has asked the EBA and ESMA to review and provide recommendations on this issue. The EBA has confirmed it will publish its response by April 2025.

What is the impact on crypto firms? 

CASPs operating in the EU that use EMTs for investment or trading purposes—not for payments or P2P transactions—are impacted. The next steps, including licensing requirements, will be decided once the EBA and ESMA provide their opinions. Until then, these CASPs should rely on grandfathering provisions to continue operations.

CASPs involved in EMT-based third-party payments or P2P transfers must ensure they either have a PSP licence (in addition to MiCA authorization) or partner with a licensed PSP.

5. Reporting requirements for CASPs under MiCA clarified 

The EBA published templates, guidelines, and an explainer summarising various reporting requirements for ART and EMT issuers under MiCA. It covers different entities, including CASPs.

What is the impact on crypto firms? 

CASPs must understand the reporting templates and thresholds relevant to their business model, the types of tokens they issue, and the countries where they operate. They need to incorporate these reporting obligations into their operations.

Argentina

6. FATF has issued a mutual evaluation report on Argentina

The Financial Action Task Force (FATF) has published a mutual evaluation report on Argentina, the second-largest crypto market by virtual asset adoption in South America after Brazil. As a result, Argentina is placed on “enhanced follow-up” and will report back to the FATF in one year.

The report focuses on VASPs, particularly as reporting entities for AML and CTF purposes. It also addresses their role in asset recovery and investigations.

What is the impact on crypto firms? 

Crypto firms operating in Argentina have to assess the impact of being qualified as reporting entities for AML/CFT purposes. Crypto firms globally are advised to consider the FATF mutual evaluation report on Argentina as a potential trigger for reviewing Argentina’s risk rating in their compliance systems and processes. 

Any questions about the regulations left? Feel free to contact us.