Cyprus to bring all cryptoasset dealings under money laundering rules

However, CySEC intends to 'gold-plate' the directive by extending AML obligations to three activities that are not included in the EU 5AMLD, namely:

• exchanges between crypto assets;
• transfer of crypto assets; and
• participation in, and provision of, financial services related to an issuer's offer and/or sale of a crypto asset.

The EU directive only imposes AML regulation on providers who exchange virtual currencies for fiat currencies and vice versa, and on 'custodian wallet providers'. CySEC's proposed rules go much further, covering, for example, initial coin offerings as well.

CySEC says it considers the extension of AML supervision to these transactions to be 'necessary and proportionate', and in line with Financial Action Task Force (FATF) recommendations.

In its October 2018 paper Regulation of Virtual Assets, FATF concluded that distributed ledger and cryptoasset technology presents new opportunities for criminals and terrorists to launder proceeds or finance illicit activities.

Comments must be submitted by 28 February.

Sources

• Elias Neocleous
• CySEC (consultation paper, PDF)
• FATF (October 2018)