Traceability of crypto-asset transfers under the new EU AML/CFT regime: the crypto travel rule between challenges and open issues

In recent years, the obligation to ensure the traceability of crypto-asset transfers has emerged as a key component of the framework to counter money laundering and terrorist financing (AML/CFT). To align with relevant global standards laid out by the Financial Action Task Force (FATF), the crypto travel rule was introduced in the EU in 2023. The regime requires crypto-asset service providers to collect and share specific data on originators and beneficiaries of crypto-asset transfers. These efforts towards accountability aim to mitigate crypto-asset risks, to which the traditional financial system is also increasingly exposed. From a technical and operational perspective, however, the application of traceability requirements poses major challenges for AML/CFT regulated entities. This chapter outlines the different dimensions of the crypto travel rule regime in the context of the international and EU-level expansion of AML/CFT measures to the crypto-asset space. It places notable focus on the regime designed for self-hosted wallets, which showcases the difficulty of applying an intermediary-based framework to the crypto-asset sphere. Relatedly, it emphasises the need to carefully assess not only how to implement the “same activities, same risk, same rules” principle in the domain at hand, but also to concurrently safeguard privacy and data protection.