European Banking Regulator Calls Attention to Digital Ledger Technology

Draft guidance from the European Banking Authority says the technology must be considered when banking supervisors look at the risk of money laundering.

AccessTimeIconMar 29, 2023 at 10:04 a.m. UTC
Updated Mar 29, 2023 at 2:36 p.m. UTC

When banking supervisors assess the risk of money laundering, they should consider whether distributed technology is being used, the European Banking Authority suggested in draft guidance published Wednesday.

The European Banking Authority, or EBA, is the European Union's banking regulator.

The guidance suggests banks and payment providers will be under pressure to enhance scrutiny of crypto companies, even amid concerns that the blockchain industry is losing access to conventional finance.

Under existing guidance, authorities must gather information on individual sectors of the economy to inform their assessment of money-laundering threats. That includes the type of customers banks have and customers' possible links to financial crime at home and abroad.

Now regulators also need to assess “the (infrastructure) technology prevalent in the sector, in particular where this is essential to the sector’s business model and operation (such as distributed ledger technology)," the EBA said, referring to the system that underpins blockchains and most cryptocurrencies.

A proposed EU rule regulating the transfer of funds requires that participants in crypto transactions be identified. That rule is due to be voted on in April, and the EBA is already trying to figure out how to implement it.

When vetting senior staff at crypto companies, supervisors should follow existing “fit-and-proper” procedures intended for banks, even before landmark new licensing rules contained in the EU’s Markets in Crypto Assets crypto regulation, or MiCA, take effect, the EBA said.

The EBA's guidance comes even as worries that crypto firms will lose access to traditional banks mount. In the U.S., regulators have rejected claims that the shutdown of Signature Bank was due to a crackdown on crypto-friendly lenders.

The EBA's guidance is open for consultation until June 29.

Edited by Sheldon Reback.

Edited by Sheldon Reback and Mark Nacinovich.


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Jack Schickler is a CoinDesk reporter focused on crypto regulations, based in Brussels, Belgium. He doesn’t own any crypto.

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