Frankfurt

The ninth MiCAR Roundtable took place on the 12th of November 2024 at the Frankfurt School Blockchain Center. Organized with the support of the European Commission, Crystal Intelligence, Frankfurt School Blockchain Center, and the Fintech Germany Award, this roundtable continued the series' mission of fostering legal clarity around MiCAR’s regulatory framework for crypto-assets. Unlike previous sessions, this roundtable focused specifically on the intersection of MiCAR and AMLR, exploring their practical applications and challenges.

The session opened with welcome remarks from Dr. Nina-Luisa Siedler, followed by an insightful agenda featuring expert presentations. Miguel Vaz from Hauck Aufhäuser Digital Custody GmbH addressed the interoperability challenges of the Travel Rule, examining technical and operational hurdles faced by CASPs in complying with MiCAR and TFR frameworks. Julia Lippoth of Coinbase presented a risk-based approach for managing incoming transfers with incomplete Travel Rule data, proposing solutions to balance AML/CTF compliance with customer service expectations. Svenja Brinkmann from Heuking Kühn rounded out the discussions by exploring KYC data sharing among CASPs and banks, identifying procedural inefficiencies and regulatory gaps that hinder collaboration.

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Interoperability of the Travel Rule and Its Challenges

This topic focused on the complexities of implementing the Travel Rule under MiCAR and TFR frameworks. Discussions highlighted how CASPs are required to exchange originator and beneficiary information to ensure transaction traceability while balancing compliance with operational efficiency and data privacy. Key challenges explored included interoperability issues among EU-based CASPs, the lack of standardization when dealing with non-EU CASPs, and the potential for digital identity solutions to streamline compliance.

Call to Actions

Adopt a Risk-Based Approach: Regulators should allow CASPs to minimize data exchanges in static setups, leveraging periodic monitoring over per-transaction reporting, to enhance operational efficiency while maintaining compliance.
Standardize Due Diligence for Non-EU CASPs: Introduce a Wolfsberg-style questionnaire tailored to crypto assets to ensure compliance and transparency in dealings with non-EU CASPs.
Align with eIDAS 2 for Digital Identity: Encourage the use of the European Digital Identity wallet to facilitate standardized, privacy-preserving data exchange for Travel Rule compliance.

Risk-Based Approach Regarding Incoming Transfers

This session addressed the operational dilemmas CASPs face when handling incoming transfers with incomplete Travel Rule data. Participants explored the TFR's Article 17, which provides CASPs discretion in deciding whether to execute, suspend, or reject such transfers. The discussion emphasized the need for risk-based decision-making frameworks that prioritize customer service while upholding AML/CTF obligations.

Call to Actions

Enable Risk-Based Execution of Transfers: Regulators should provide clear criteria allowing CASPs to execute transactions with incomplete TR data, provided robust monitoring systems are in place.
Mandate Communication Standards for TR Data Resolution: Establish secure and interoperable messaging protocols for CASPs to retrieve missing data efficiently from counterparties.
Incentivize Technological Solutions: Encourage CASPs to adopt advanced transaction monitoring systems, automated communication protocols, and privacy-preserving technologies to streamline compliance.

KYC Sharing Among CASPs and Traditional Banks

This topic explored the procedural challenges of sharing KYC data between CASPs and traditional banks. The discussion focused on the stringent requirements under Section 17 of the AML Act, which often render existing customer data unusable, and the applicability of TFR in crypto transactions facilitated by banks.

Call to Action

Enable Flexible KYC Data Sharing: Regulators should create a legal framework allowing CASPs to reuse validated KYC data within a reasonable timeframe, reducing procedural redundancies and improving efficiency.
Facilitate Cross-Border Collaboration: Establish explicit provisions for the cross-border sharing of KYC data, ensuring secure and standardized processes across jurisdictions.
Clarify Responsibilities under TFR: Specify that banks acting as intermediaries for fiat-to-crypto transactions are exempt from obligations to transmit transaction data, leaving this responsibility to crypto custodians.