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AML and other regulations in crypto
Learn more about how MarketGuard AML compliance software can assist a European VASP and CASP with blockchain transaction monitoring and Travel Rule
The introduction of the Markets in Crypto-Assets (MiCA) Regulation by the European Union marks a transformative moment for the crypto asset industry. As crypto asset service providers (CASPs) prepare for MiCA’s full enforcement, one area that demands urgent attention is the AML/KYC compliance stack.
MiCA aims to bring clarity, structure, and accountability to the crypto markets. It introduces a comprehensive regulatory framework that not only redefines how crypto asset services are provided but also sets rigorous standards for anti-money laundering (AML) and know your customer (KYC) processes. For businesses operating in the crypto asset markets, staying ahead means aligning AML/KYC technology with MiCA’s evolving regulatory requirements.
In this article, we’ll explore how MiCA regulation reshapes AML/KYC expectations, the role of technology in achieving regulatory compliance, and the steps your business should take to update its compliance stack.
The Markets in Crypto-Assets (MiCA) regulation is a comprehensive regulatory framework established by the European Union to govern crypto assets in Europe. It aims to provide a uniform European legal framework for crypto-assets issuers and service providers not covered by existing financial services regulations. MiCA applies to the issuance, public offering, admission to trading, and provision of services related to crypto-assets, ensuring a high level of protection for retail investors and the integrity of the crypto-asset markets. The regulation is part of the European Commission’s Digital Finance Strategy, which aims to promote a transparent, stable, and innovative financial system.
MiCA has a broad scope, applying to all crypto-asset service providers (CASPs) operating within the European crypto industry. It regulates the provision of services related to crypto-assets, including custody, administration, operating trading platforms, executing orders, and providing exchange services between crypto assets and fiat currencies. The regulation distinguishes four main types of crypto-assets: e-money tokens, asset-referenced tokens, security tokens, and utility tokens. However, it does not apply to crypto-assets that qualify as financial instruments, deposits, funds, securitization positions, non-life or life insurance products. MiCA’s scope and application are designed to ensure that all CASPs operating in the EU are subject to a comprehensive regulatory framework, providing a high level of protection for consumers and preventing market abuse.
MiCA introduces several key components, including a regulatory framework for asset-referenced tokens and e-money tokens, which are subject to strict prudential requirements. Only authorized credit institutions or electronic money institutions are permitted to offer e-money tokens to the public or seek admission to trading within the European Union. Issuers of asset-referenced tokens must undergo a fit and proper evaluation of their management and a screening of their shareholders to ensure they have sufficiently good repute. They must also adhere to prudential requirements, including maintaining a sound governance structure, meeting own funds requirements, and creating a reserve of assets to cover risks. MiCA also introduces liability against an issuer of asset-referenced tokens for the information contained in the white paper, ensuring that investors have access to accurate and reliable information.
MiCA is the first EU-wide legislation tailored to the crypto assets regulation landscape. It applies to entities that provide crypto asset services, issue crypto assets, and operate crypto asset trading platforms. The goal? Safeguard financial stability, promote consumer protection, and ensure market integrity.
Key features of MiCA include:
A licensing regime for crypto asset service providers.
Stricter rules on marketing communications and public disclosure.
Mandatory transparency and disclosure requirements for crypto asset issuers.
Anti-market manipulation and market abuse safeguards.
Clear guidelines for the issuance of e money tokens and asset referenced tokens.
What’s new under MiCA is the heightened focus on AML/KYC compliance. While previous regulations addressed AML obligations indirectly, MiCA explicitly integrates anti money laundering and customer due diligence into its framework, bringing crypto asset services closer to the standards of financial institutions.
MiCA’s provisions necessitate robust AML/KYC technology stacks. This includes identity verification, transaction monitoring, data protection, and regulatory reporting. The authorisation process for CASPs is crucial for ensuring compliance and effective regulatory reporting. Let’s look at the core compliance updates businesses need to make:
Under MiCA, CASPs must implement KYC measures that align with EU standards for financial institutions. This includes:
Verification of legal persons and natural persons engaging in crypto asset transfers.
Support for security access protocols that authenticate customer identities.
Collecting and storing customer information using secure systems that comply with applicable national law.
Technology solution:
Use AI-powered identity verification solutions for faster onboarding.
Leverage biometric authentication, document scanning, and blockchain-based KYC wallets.
MiCA places obligations on crypto companies to detect suspicious activity and flag potential money laundering and terrorist financing risks.
Technology solution:
Deploy machine learning algorithms to monitor crypto transactions and identify anomalies.
Real-time alerts for abnormal transaction patterns using distributed ledger technology (DLT) tracking tools.
Customer information and transaction data must be stored electronically in compliance with MiCA regulations.
Given the rise of DeFi protocols, custodian wallet providers, and decentralized exchanges, MiCA requires CASPs to adopt cross-platform AML tools that work across varied ecosystems.
Technology solution:
Adopt interoperable compliance APIs.
Integrate tools that assess transactional risk based on user behavior, geography, asset type, and similar technology.
The regulation enforces strong data retention rules and mandates public availability of the crypto asset white paper for certain tokens.
Technology solution:
Use secure cloud-based storage for customer PII and KYC documents.
Automate generation and updates of marketing communications relating to crypto assets MiCA governs.
Ensure prior authorisation from the competent authority for certain data management practices.
MiCA regulates stablecoins, which are crypto assets that aim to maintain a stable value relative to a fiat currency or other assets. The regulation introduces strict rules for the issuance of stablecoins, including the requirement for a sufficient reserve of assets to cover risks. Stablecoin issuers must also comply with specific requirements, such as notifying the competent authority with the information listed by the MiCA Regulation. The regulation aims to prevent market manipulation and ensure the stability of the financial system. MiCA’s stablecoin regulation is designed to provide a high level of protection for consumers and prevent the risks associated with stablecoins, such as the potential for market manipulation and the lack of transparency.
MiCA introduces rules to prevent market abuse, including insider dealing, disclosure of inside information, and market manipulation. The regulation applies to all participants who professionally organize or execute transactions involving crypto-assets, ensuring that they have systems in place to prevent and detect market abuse. MiCA also introduces transparency and disclosure requirements, including the requirement for issuers to publish a white paper with specific content requirements. The regulation aims to ensure that crypto-asset markets operate in a fair and transparent manner, preventing market abuse and protecting consumers. MiCA’s prevention of market abuse is designed to promote a stable and innovative financial system, ensuring that all market participants operate in a fair and transparent manner.
MiCA introduces a pan-European supervisory framework. The European Securities and Markets Authority (ESMA) and European Banking Authority (EBA) will oversee implementation, alongside national competent authorities. The European Commission plays a crucial role in overseeing the implementation of MiCA regulations, ensuring financial stability and investor protection in the EU crypto asset market.
Your compliance stack must accommodate:
Regulatory reporting to competent authority.
Data sharing with markets authority on market abuse or AML violations.
Support for inspections by European banking authority under the Digital Operational Resilience Act.
Ensure your technology stack includes:
Compliance dashboards with audit trails.
APIs for submitting suspicious transaction reports.
Tools for aligning operations with technical standards from regulators.
Conduct a Compliance Gap AnalysisAssess your current stack to identify discrepancies with MiCA regulation.
Upgrade to Modular Compliance SoftwareChoose platforms that support the full AML/KYC cycle—from onboarding to reporting.
Implement Strong Customer Risk ScoringMiCA supports a risk-based approach to compliance. Automate segmentation based on customer risk profiles.
Train Your Compliance TeamsUpdate internal training on MiCA and changes to crypto services like portfolio management, admission to trading, and transfer services.
Ensure InteroperabilityYour tools must integrate across services—whether issuing electronic money tokens, operating a trading platform, or providing services related to crypto assets.
Investment Firms ComplianceInvestment firms, alongside other financial institutions, must comply with MiCA's regulatory requirements. Even if not subject to MiCA's authorisation requirements, they need to adhere to certain rules.
Failing to meet MiCA’s AML/KYC requirements can result in:
License revocation by national competent authorities.
Hefty fines for inadequate due diligence or failure to prevent market abuse.
Reputational damage and blacklisting from EU markets.
Non-compliance during the transitional period can lead to operational disruptions and delays in obtaining necessary licensing.
Your AML/KYC system is your first line of defense. Make sure it’s battle-ready.
MarketGuard provides a turnkey solution for crypto asset service providers looking to align their AML/KYC processes with MiCA’s regulatory framework.
MarketGuard helps firms comply with the 'crypto asset act' and its regulatory frameworks.
With MarketGuard, you get:
Real-time transaction monitoring with AI-powered analytics.
Risk scoring for crypto asset transfers, wallets, and counterparties.
Secure customer onboarding tools compliant with electronic money institution requirements.
Seamless reporting to national competent authorities under applicable national law.
Scalable solutions for service providers authorised to operate across the EU.
As crypto assets become integral to the international financial system, MiCA ensures that transparency, integrity, and consumer protection remain at the forefront. MarketGuard makes it simple for crypto businesses to adapt their compliance stack to match this vision.
The MiCA regulation ushers in a new era of accountability and professionalism for the crypto asset markets. To remain competitive, crypto asset service providers must invest in the right technologies to support anti money laundering, KYC compliance, and regulatory reporting.
Member states play a crucial role in enforcing MiCA regulations and ensuring compliance across the EU.
Updating your compliance stack isn’t just about avoiding penalties—it’s about building long-term trust in the crypto economy.
With the right tools, a clear strategy, and expert partners like MarketGuard, your firm can not only meet MiCA’s expectations but thrive under them.
For more information about how we can help reach out to us. We're here to help and answer any questions you may have.
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European Union. (2023). Markets in Crypto-Assets (MiCA) Regulation. https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32023R1114
European Banking Authority (EBA). (2023). Guidelines on Anti-Money Laundering and Countering the Financing of Terrorism. https://www.eba.europa.eu
European Securities and Markets Authority (ESMA). (2024). MiCA Implementation Timeline and Supervisory Expectations. https://www.esma.europa.eu
Financial Action Task Force (FATF). (2023). Updated Guidance for a Risk-Based Approach to Virtual Assets and VASPs. https://www.fatf-gafi.org/publications/fatfrecommendations/documents/guidance-rba-virtual-assets-2023.html
European Parliament. (2023). MiCA Regulation Legislative History and Objectives. https://www.europarl.europa.eu
Deloitte. (2023). How MiCA Will Shape the Future of AML/KYC Compliance in the EU. https://www2.deloitte.com
Chainalysis. (2024). Adapting KYC/AML Tech for the New Era of Crypto Regulation. https://www.chainalysis.com
CoinDesk. (2023). MiCA Regulation and Its Impact on European Crypto Markets. https://www.coindesk.com
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