AML Guidance on Crypto Firms: Will It Be For The Better?

Nagaya Technologies
6 min readMar 16, 2024

The discussion on regulations has been a discussed topic since the beginning of 2024 as many nations try to keep up with the trajectory of the DeFI Space. Predictions and Analysis are flying off the charts as the community braced for an exciting year for the DeFI Space and the race for the DeFI regulations continues to go on. Let’s take a look at the AML Guidance that was recently developed by the EBA and what its possible impacts might be to achieve sustainable growth for the DeFI Space.

AML Guidance on Crypto Firms

The DeFI Space may still be in its maturing phase as it approaches 2024 but it has been a wild ride in this short span of time. It has managed to turn a lot of perceptions from being totally against the DeFI Space into adopters and maximalists. With the recent approval of Spot ETF and Bitcoin Halving impending this year, we should expect more enthusiasts to flow into the space which will in turn provide a positive boost for the value of Digital Assets.


Despite a year that was deemed to be a recovery phase for the space, Bitcoin managed to end the year with a positive 154% growth on a year to year basis while other Digital Assets followed on a positive trend. It will soon outperform many major indexes from the traditional markets and attract many onlookers towards the DeFI Space as everybody hoped that the “Winter Phase” is finally over to seize the opportunity.

This consistent growth has turned a lot of attention to the DeFI Space as the community looks to seize the opportunity of a lifetime as what happened in 2021. As Bitcoin is predicted by some analysts to reach 6 figures in 2024, everybody would like to be a part of the DeFI Space and this is enough to generate a massive hype for what is soon to come. From the history of 2021, we know that hype is not sustainable and more importantly a double-edged sword.

The massive hype behind the DeFI Space in 2021 was instrumental in driving excitement to up-and-coming fundamentally sound projects but it’s also responsible for the creation of plenty of projects with unrealistic promises. Memecoins and NFT are just some examples of these projects that had an astronomical rise in value during their peak in 2021 but proceeded to quite disappear when 2022 came along and left a sour taste for its community.

With soaring prices and huge excitement from the community, it seems like in 2021 anything could be the next big thing and this is the fundamental lesson that everybody learned the hard way. One thing that all can agree upon is that Blockchain Technology really proves its value during possibly the most chaotic years of the Pandemic era and a lot of the community has been helped by the widespread adoption of the DeFI Space.

The decentralized nature of the DeFI Space has helped many global communities where economic uncertainty, unfortunately, had to take place. Global Donations that flow to Ukraine and citizens protecting their wealth through digital assets during the skyrocketing inflation in Turkey are just some examples of how DeFI Space has great potential. Of course, with every great adoption of the DeFI Space, there is always a community willing to misuse it.

Digital Assets have also been a major place for Money Laundering and Financial theft from across the world as bad actors look to take advantage of their decentralized nature. As the DeFI Space continues to expand its wings in 2024, the volume of money being laundered through these DeFI platforms has also grown. This is why strict AML procedures have been implemented on various platforms to safeguard the sustainability of the DeFI Space.

The concern is obviously placed on the anonymity nature of the Digital Assets while transactions within Centralized Platforms like CEX are easier to trace, Decentralized Platforms prove to be a much more difficult task. Conversion from Fiat to Digital Assets mostly occurs on Centralized Platforms and this is why these platforms need to be safeguarded with strict KYC Protocols. These KYC Protocols are different for every platform but usually follow basic regulations where the user must state their Personal Details and provide an Identity Document to verify their data.

For transactions above a certain threshold, the users will be required to provide a selfie with the Identity to get to know who the account owner really is. Some platforms require your residence details and possibly banking details for further verification of who the account owner/user really is. This verification data is utilized by regulators to oversee the potential for financial crimes among each user.

The recent guidelines developed by the European Banking Authority aim to strengthen these current regulations as Crypto Asset Service Providers (CASPs) are now required to comply with stringent anti-money laundering (AML) and know-your-customer (KYC) financial regulations. This means that CASPs, including exchanges, wallets, and custodians within the EU Region need to assess how likely they are to be involved in financial crimes by scrutinizing their customers and the products they offer, how they deliver those products, and where they are located.

Based on these factors, every CASP will have to apply the proper due diligence based on the risk-based approach. This should help CASPs understand the users that are onboarded within their network and identify which parts of their business are vulnerable to ML or TF. The deadline for these guidelines is set to be 2 months after the publications are translated to official EU languages and should be enforced along with the MICA regulations by 31st December 2024.

Impacts on the DeFI Space

Every regulation imposed on the DeFI Space will obviously be met by stringent criticism from both sides of the community. On one side there are parts of the community that welcomed regulations as a betterment for the space while the other wished for the DeFI Space to be free from the traditional world. Over the years one thing everybody can agree upon is that some oversight is needed to prevent the wild ride from ever happening again.


Stringent KYC/AML procedures will obviously be a good measure to restore the trust of the user within the platform but it could also dissuade many users that would like to remain private. This will present a great step forward in limiting the entry points for bad actors but Decentralized Platform still presents a loophole for these measures to be effective. These guidelines will also involve CASPs with the responsibility of ensuring the users within the network and this will be significant in mitigating the ML risk.

The major impact for the DeFI Space is these guidelines should provide sustainable growth for the space within the largest region in the world. With the success of these guidelines and the MICA Regulation, it can be an example for other regions to strengthen AML policy. Of course, with every new regulation, there is also going to be an adjustment period to determine which institutions are compliant and which ones are not.

This is why the guidelines should also involve regulators in the global network surveillance to mitigate Money Laundering risk within CASPs. Overall it should be an exciting new step in restoring better clarity and compliance within the DeFI Space that will prove crucial over the long term. All in all, we need to continue to look forward to the development of the regulatory framework and brace for an important year for the DeFI Space in 2024!

We at Nagaya Technologies Pte Ltd. are excited about the development of the regulatory framework worldwide. These developments should be able to promote better clarity and regulatory compliance within the space. Our vision is to create trust and value through legality and transparency for the revolutionary hybrid concept of Nagaya as a Digital Asset. To learn more about Nagaya Technologies and the world’s first hybrid cryptocurrency, you can read our whitepaper through our website at

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Nagaya Technologies

NAGAYA (NGY) is a Gold-Backed Cryptocurrency with Subsidiary Projects. We aim to build Trust and Value through LEGALITY and TRANSPARENCY.