Circle recommends EU crypto guidelines to be MiCA-centred

• Circle recommended that the regulator use the MiCA-defined term “crypto-asset service provider” instead of “providers of services in the crypto-assets ecosystem.”
• The USDC issuer also said that the guidelines shouldn’t extend to providers not subject to MiCA’s regulatory scope.

On 31 August, Circle [USDC] responded to the European Banking Authority’s (EBA) public consultation on the extension of the scope of its money laundering and terrorist financing (ML/TF) guidelines to crypto platforms. EBA is the banking regulator of the European Union (EU).

Patrick Hansen, Circle’s EU Strategy & Policy Director, informed about the response on a blog on 5 September.

The stablecoin issuer voiced its concern over the usage of the term “providers of services in the crypto-assets ecosystem” in the proposal. It added that the term is too vague and broad in its definition.

Due to its ambiguity, it could also include providers of technology services, such as blockchain and web infrastructure. Circle recommended using the Markets in Crypto-Assets Regulation (MiCA)-defined term “crypto-asset service provider” (CASP).

Circle also cautioned the EBA that its guidelines shouldn’t extend to providers not subject to MiCA’s regulatory scope. These guidelines need to be technology-neutral. They should adhere to principles established by EU legislations enacted earlier such as the MiCA and the Transfer of Funds Regulation (TFR).

Self-hosted wallets already under TFR’s purview, Circle argues

The USDC issuer further underscored that self-hosted wallets were not a general indicator of high-risk. It also cited a Financial Action Task Force (FATF) review published in July 2021 to argue that the data pertaining to illicit transactions with self-hosted wallets is highly variable. The data underscored a lack of consensus on ML/TF risks over these wallets.

The stablecoin issuer stated that the TFR already addresses risks involving illicit transactions over self-hosted wallets. There is therefore no need for EBA to include this section in the guidelines.

It was in May that the EBA launched a public consultation on amendments to its ML/TF guidelines. The latest set of guidelines also extends its scope to crypto platforms.

EBA claims that the crypto service providers pose unique risks because of their novel technologies, global instant asset transfers, and privacy-enhancing features. The body aims to establish standard regulatory guidelines to properly identify and contain these risks within the crypto sector.