The European Union's banking watchdog on Tuesday issued guidance for crypto firms to comply with its anti-money laundering and terrorist-financing requirements.

By extending the scope of its existing measures to cover crypto, the European Banking Authority (EBA) "harmonizes the approach" that crypto asset service providers (CASP) across the EU should adopt to combat financial crime, it said in a press statement.

"The risks of this happening can be increased, for example because of the speed of crypto-asset transfers or because some products contain features that hide the user’s identity. Therefore, it is important that CASPs know about these risks and put in place measures that effectively mitigate them," the statement said.

The EU last year finalized legislation on the transfer of funds via digital assets alongside its landmark Markets in Crypto Assets (MiCA) regulatory package. The EBA has since published guidelines on risk-based supervision of CASPs and is consulting on the proposed guidelines to prevent the abuse of crypto transfers that align with recommendations from the global watchdog, the Financial Action Task Force (FATF). It's also consulting on further guidance relating to internal policies and controls CASPs should have.

"Given the interdependence of the financial sector, the new Guidelines also include guidance addressed to other credit and financial institutions that have CASPs as their customers or which are exposed to crypto assets," the EBA said.

Competent authorities have to report whether they comply with the new guidelines within two months of publishing the guidelines translated into the official EU languages. The guidelines will apply from Dec.30, around the time when MiCA takes full effect.