The EU wants its new financial crime watchdog to supervise crypto as it cracks down on money laundering: report

• The EU is looking at giving its new money-laundering regulator oversight of crypto companies, sources told Bloomberg.
• Its members are concerned crypto firms may be used to process illicit funds and terrorist financing.

The European Union is looking at bringing crypto companies under the watchful eye of its new financial crimes regulator, according to a Bloomberg report Tuesday.

Member states are currently hammering out the remit of the Anti-Money Laundering Authority, which is expected to start work in 2024. It is being introduced to provide bloc-wide supervision of financial institutions, after a series of scandals that highlighted the flaws in the current patchwork approach.

Concerns that crypto companies are being used to process illicit funds and terrorist financing has prompted a group of countries, led by Germany, to push for the sector to be part of the regulator's job, sources told Bloomberg.

"It is key that the scope of the new EU authority explicitly includes crypto assets, given that this is one of the fields more prone to money-laundering activities," Luis Garicano, one of the EU lawmakers leading the proposal, told Bloomberg.

EU members want the regulator to cover the riskiest cross-border entities among banks, financial institutions and crypto asset service providers, a diplomat briefed on the discussions told the news outlet.

There have been calls for increased scrutiny of the crypto sector, given the risks to consumers, and regulatory clarity is seen as key to encouraging institutional investors to consider digital assets. As well as the EU, the UK and US are seeking to develop a regulatory framework for crypto.

The crypto market has seen a surge in crime, as anonymity and lack of regulatory oversight exacerbate unlawful crypto activity. Illegal crypto transactions reached an all-time high of $14 billion in 2021, up 80% from the previous year, while $8.6 billion worth of crypto was laundered by cybercriminals, according to a Chainalysis report.

The EU has taken a hard stance against money laundering and financial crime, and in proposals last year aimed to strengthen its anti-money laundering and terrorist financing rules, as it set out the new regulator.

"Today's measures greatly enhance the existing EU framework by taking into account new and emerging challenges linked to technological innovation," the European Commission said at the time. It mentioned virtual currencies as being among these challenges.