European Union financial regulators have said that crypto exchanges should lose their licenses if they have seriously breached anti-money laundering rules.
The recommendation comes as lawmakers reach the final stages of landmark legislation known as the Markets in Crypto Assets Regulation (MiCA).
Regulators responsible for licensing or registering crypto exchanges and wallet providers should be "empowered to withdraw licensing/registration for serious breaches of AML/CFT [anti-money laundering and terrorist financing] rules," according to a report released Wednesday by the three European regulators responsible for overseeing banking, insurance and securities markets.
MiCA should "adequately integrate anti-money laundering and counter-terrorist financing issues into the supervision of firms," according to the report, which examines whether anti-money laundering powers contained in regulations for various financial sectors are up to par. MiCA introduces requirements for stablecoin issuers to hold sufficient capital reserves and be monitored by regulators such as Germany's BaFin.
One of the remaining sticking points in the legislation concerns whether stronger AML controls should be provided or whether this issue should be left to a separate, broader review of black money regulations.
Major players such as Binance, the largest crypto exchange by traded volume, are now registered in EU countries such as France and Italy, while the bloc is tightening its AML laws in the wake of a series of scandals involving conventional lenders such as Danske Bank and Malta's Pilatus.