Loading...
Main
Products
Client onboarding Transaction monitoring Treasury management
Integrations Release notes Pricing Blog
Main
Products
Client onboarding Transaction monitoring Treasury management
Integrations Release notes Pricing Blog
Contact us
Blog

Learn more about KYC,
AML and other regulations in crypto

Book a demo

Learn more about how MarketGuard AML compliance software can assist a European VASP and CASP with blockchain transaction monitoring and Travel Rule

Implementing Effective AML Controls for VASPs and CASPs

Apr 30 2025

The implementation of the Markets in Crypto-Assets (MiCA) Regulation across the European Union marks a pivotal evolution in the regulatory landscape for crypto asset service providers (CASPs and VASPs). One of the key focus areas of MiCA is anti-money laundering (AML), with the regulation reinforcing the necessity for robust AML frameworks to combat illicit financial activity and enhance the integrity of the crypto asset markets. Under MiCA, crypto firms are required to implement comprehensive AML measures, including enhanced customer due diligence, transaction monitoring, and risk assessment protocols aligned with the EU’s broader financial crime prevention framework. The regulation emphasizes the importance of transparency, requiring clear disclosures, traceability of crypto asset transfers, and collaboration with competent authorities and financial intelligence units (FIUs). For service providers offering crypto asset services—such as custody, exchange, and transfer—AML compliance is no longer optional. Firms must align with MiCA’s expectations by integrating advanced identity verification, securing electronic money transfers, implementing real-time fraud detection systems, and ensuring that all crypto services meet the standards for financial stability and market abuse prevention. This article outlines best practices and strategic insights for implementing effective AML controls in line with MiCA, helping crypto businesses reduce legal and reputational risks, strengthen customer trust, and maintain operational continuity in a fast-evolving regulatory environment.

As the Markets in Crypto-Assets (MiCA) Regulation becomes the cornerstone of crypto assets regulation across the European Union (EU), one of its most critical pillars is the implementation of Anti-Money Laundering (AML) controls. For Crypto Asset Service Providers (CASPs) and Virtual Asset Service Providers (VASPs), aligning AML practices with MiCA is not merely about compliance—it’s about contributing to the financial stability and integrity of the broader digital economy.

Table of Contents

Introduction to MiCA Regulation

The 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. The regulation applies to the issuance, public offering, admission to trading, and provision of services related to crypto-assets. The MiCA Regulation defines crypto-assets as digital representations of value or rights that can be electronically transferred and stored using distributed ledger technology or similar technology.

Understanding MiCA's AML Framework

The MiCA regulation establishes a comprehensive regulatory framework governing crypto assets, crypto asset service providers, and issuers. It aligns closely with the EU’s existing AML Directives and works in tandem with the Financial Action Task Force (FATF) recommendations, particularly the “travel rule” and obligations around enhanced due diligence. MiCA’s AML-related obligations emphasize:

  • Identification and verification of customers (KYC)

  • Transaction monitoring

  • Suspicious transaction reporting

  • Risk-based approach implementation

  • Strong internal AML governance and controls

In addition to AML obligations, MiCA also imposes prudential requirements on issuers and service providers to ensure financial stability and compliance.

These obligations apply to those who provide crypto asset services such as trading platform operations, transfer services, custody and administration, and the offering of asset-referenced tokens or e-money tokens.

Scope and Application of MiCA

The MiCA Regulation applies to crypto-asset service providers (CASPs) operating within the European crypto industry. It regulates the provision of services related to crypto-assets in the EU, including custody, operating trading platforms, exchanging services, and providing advice. The regulation sets out rules on transparency and disclosure requirements, authorisation, and supervision of crypto-asset service providers. The MiCA Regulation excludes non-fungible tokens (NFTs) from its scope, except for those re-qualifying as crypto-assets. It also excludes decentralized finance (DeFi) and other blockchain-related assets that are not considered crypto-assets under MiCA.

Definition and Requirements

The MiCA Regulation defines four main types of crypto-assets: e-money tokens, asset-referenced tokens, security tokens, and utility tokens. Asset-referenced tokens are tokens that try to stabilize their value using the value of another asset or right. E-money tokens are electronic money tokens that represent official currencies. The regulation sets out specific requirements for the issuance of asset-referenced tokens and e-money tokens, including the need for prior authorisation from a competent authority. Issuers of asset-referenced tokens and e-money tokens must demonstrate compliance with own funds requirements and governance arrangements.

Core Expectations for VASPs and Crypto Asset Service Providers

1. Know Your Customer (KYC) and Identity Verification

MiCA expects crypto asset service providers to establish rigorous identity verification protocols. This includes:

  • Collecting personal data to verify the identity of customers (natural or legal entity)

  • Using robust verification mechanisms, such as biometric verification and digital ID checks

  • Ensuring enhanced scrutiny for high-risk jurisdictions and politically exposed persons (PEPs)

The goal is to ensure that users of crypto asset trading platforms or those involved in crypto asset transfers are known, traceable, and accountable.

2. Ongoing Transaction Monitoring

Crypto exchanges and trading platforms are required to conduct real-time monitoring of crypto asset transfers and trading activities. Suspicious behavior patterns—such as rapid movements of electronic money tokens or unusually large transfers of crypto assets—must be flagged. Monitoring must also aim to detect and prevent market manipulation, ensuring the integrity of the trading platform.

Monitoring must cover:

  • Transfers of both fiat currency and crypto assets

  • Asset-referenced token movements

  • Abnormal behaviors suggesting potential money laundering or terrorist financing

3. Suspicious Transaction Reporting

If suspicious transactions are detected, CASPs must report them to the relevant national competent authority (NCA) and Financial Intelligence Units (FIUs) in line with applicable national law. These may include:

  • Multiple transfers below the reporting threshold

  • Transfers to/from high-risk countries

  • Activity inconsistent with a customer’s known financial profile

CASPs and VASPs should also align with the obligations set forth under the Bank Secrecy Act (BSA) and the Financial Crimes Enforcement Network (FinCEN) for cross-border applicability.

4. Enhanced Due Diligence (EDD)

For high-risk cases, MiCA mandates that providers apply enhanced due diligence measures. This may involve:

  • Collecting additional documentation

  • Conducting detailed source of funds and wealth verification

  • Ongoing monitoring of high-risk clients

Enhanced due diligence is particularly crucial for credit institutions and other high-risk entities.

EDD is particularly crucial for investment firms, custodian wallet providers, and service providers authorised to offer complex crypto asset services.

5. Internal AML Governance

The MiCA regulation calls for the establishment of a robust internal AML structure that includes:

  • Appointment of a compliance officer

  • AML training for staff

  • Audit trails and transaction logs stored electronically for five years

Governance also includes ensuring that marketing communications relating to crypto asset services are not misleading and are compliant with the transparency and disclosure requirements outlined in MiCA.

Interaction with Other Legislative Measures

The MiCA Regulation interacts with other legislative measures, such as the Digital Operational Resilience Act (DORA) and the Transfer of Funds Regulation. DORA introduces a harmonised framework on digital operational resilience for European financial institutions, while the Transfer of Funds Regulation introduces an obligation for crypto-asset service providers to collect and make accessible data on the originator and beneficiary of transfers. The MiCA Regulation also interacts with the European Union’s anti-money laundering and combating the financing of terrorism (AML/CFT) framework. Crypto-asset service providers must comply with AML/CFT requirements, including customer due diligence, reporting suspicious transactions, and maintaining records.

Integrating AML Controls into Operational Systems

Distributed Ledger Technology (DLT) and Crypto Assets

DLT systems must be leveraged to enable traceability and real-time AML checks. Regulatory guidelines, often released as part of a consultation package, provide detailed instructions on implementing these technologies. For example:

  • Smart contracts on crypto asset trading platforms can execute automatic compliance checks

  • Blockchain analytics tools can trace crypto asset transfers across networks

Digital Operational Resilience

The Digital Operational Resilience Act (DORA) complements MiCA by emphasizing the need for robust cybersecurity and data integrity. These systems must also be capable of preventing market abuse by ensuring data integrity and robust cybersecurity measures. AML systems must:

  • Be resistant to tampering

  • Log and secure transaction data

  • Integrate with external watchlists and sanctions databases

Timeline for Application

The MiCA Regulation will become fully applicable on 30 December 2024, subject to a discretionary transition period. Individual Member States can notify the European Commission to use transitional measures for a specified period. Firms should note that relying on grandfathering provisions does not grant them the status of a MiCA crypto-asset service provider. The regulation requires crypto-asset service providers to be authorised prior to carrying on their activity. The authorisation process involves a white paper with specific content requirements set out in the MiCA Regulation. The white paper must be submitted to the competent authority as part of the authorisation process.

Supervisory and Comprehensive Regulatory Framework Oversight

The European Banking Authority (EBA), together with national competent authorities, supervises AML implementation. These institutions are tasked with:

  • Monitoring compliance across member states

  • Issuing technical standards for consistent application of rules

  • Coordinating cross-border investigations to prevent market abuse and financial crime

MiCA also involves the European Securities and Markets Authority (ESMA) in shaping technical standards and promoting consistent supervision.

Challenges and Opportunities

Challenges:

Integrating AML controls into decentralized systems

Crypto asset issuers face significant challenges in integrating AML controls into decentralized systems.

Aligning multiple national laws with MiCA’s unified framework

Managing the compliance costs associated with advanced transaction monitoring

Opportunities:

The evolving regulatory landscape presents numerous opportunities for crypto-asset service providers. Gaining trust from regulators and customers is paramount. Offering robust portfolio management services can attract institutional investors by demonstrating regulatory compliance.

Attracting institutional investors through demonstrable regulatory compliance is crucial. Leveraging AML compliance as a competitive advantage in the crypto markets can further enhance trust and credibility.

MarketGuard's Role in AML Compliance

MarketGuard offers solutions designed to help CASPs and VASPs align with MiCA’s AML requirements. MarketGuard offers a range of crypto services designed to help CASPs and VASPs align with MiCA’s AML requirements. These include:

  • Automated KYC and onboarding workflows

  • Transaction monitoring and real-time alerting

  • Regulatory reporting dashboards and audit trails

MarketGuard also ensures that marketing communications are compliant with MiCA’s expectations and that customer data is stored securely in accordance with public disclosure and transparency standards.

Conclusion

AML controls under MiCA are no longer optional—they are an integral part of the crypto asset regulatory framework. For crypto asset service providers, implementing effective AML systems is essential to ensure financial stability, customer protection, and regulatory compliance.

MiCA represents a significant step forward in the regulation of digital finance, providing a unified framework for the crypto asset markets.

MiCA presents a historic opportunity to legitimize and mature the crypto asset markets across the European Union. Those CASPs and VASPs that act now to embed robust anti-money laundering frameworks will not only mitigate legal risk but also position themselves as trustworthy, forward-looking players in the future of finance.

For more information about how we can help reach out to us. We're here to help and answer any questions you may have.

Contact us!

***

References

See other posts
Main
Products
Client onboarding Transaction monitoring Treasury management
Integrations Release notes Pricing Blog Glossary