The New Crypto Market Rules: Embracing Innovation while Managing Risks

Since the creation of Bitcoin in 2009, cryptocurrencies have gained tremendous popularity, reaching an all time peak in 2021. Despite early criticism and skepticism, the reality is that crypto is here to stay. As market trends evolve and regulation is coming up, banks, crypto-assets service providers, and investors need to be prepared for this change and need to make their business model future proof. As PwC we are here to help and support in this transformation.

Currently, over 400 million people worldwide are investing and trading in crypto-assets, and crypto is increasingly being accepted as a means of payment on retail websites. Moreover, the technology has fundamental links to the Metaverse, which is considered the future of the internet. The growth of the crypto industry has been largely driven by its unique features, such as decentralization, security, and speed of transactions.

The New Crypto Market Rules: Embracing Innovation while Managing Risks

Despite its increasing presence in the financial market, the crypto industry has remained largely unregulated for a long period of time, especially in Europe. However, this is set to change in 2023, as new regulations come into effect. The Anti-Money Laundering Directive 5 is currently the only act that covers virtual assets, but the new regulations, with MiCA as the frontrunner, will represent a major step in the regulation of the crypto industry, in providing clarity for businesses and investors.

The new regulations reflect the growing importance of crypto-assets and the need for a consistent and predictable regulatory framework. We as PwC are here to help you understand the changes that are coming, eliminate uncertainties surrounding crypto and to show you how to efficiently mitigate crypto-assets risks and stay on top of the regulatory updates.

The struggles of an unregulated industry

The pseudo-anonymous and global character of crypto-assets, combined with a non-regulated market, made the industry increasingly popular, even among those involved in the purchase of illicit goods. The characteristics of crypto-assets provide a very convenient way to launder money and conceal the proceeds of illicit activities. As a result, the prevention of money laundering was the first area where regulation of crypto-assets was introduced. In 2018, through the Anti-Money Laundering Directive (AMLD5), the European regulators took steps to mitigate the risks and harmonize legislation across the EU by imposing a couple of requirements, on a risk based ruling, in relation to crypto-asset providers.

The requirements of the AMLD5 had to first be transposed into the national legislation of the Member States, which resulted in differences in application across the EU. The AMLD5 imposed a registration obligation for crypto-asset providers, however several countries imposed stricter rules. Germany imposed a licensing regime, while the Netherlands required the CASPs to comply with the Wwft (Dutch AML Act) and Sw (Sanctions Act) in order to be registered and obtain the right to operate.

The different national transpositions of the Directive makes it attractive for certain parties to pick and choose the country where they will operate their business. And, therefore, circumvent the stricter regulations and abuse a more flexible regime. 

In light of the growing use of crypto-assets and the risks associated, regulators and supervisors have been working towards a framework that will apply uniformly across the EU and that will guide the industry which seemed untamable due to its volatile and pseudo-anonymous nature in order to help it get into the mainstream in a safe and stable manner.

With the upcoming regulations, financial institutions such as banks, payment service providers, as well as crypto-asset service providers (CASPs) need to be prepared to implement the new requirements and need to be aware of the risks associated with crypto assets and how to manage them.

What is changing and when?

2023 is pivotal for the Crypto-Asset Market, as multiple frameworks are coming into effect. We will elaborate on four main acts, the Markets in Crypto-Assets Regulation (MiCA), the Transfer of Funds Regulation (TFR), the Crypto-Asset Reporting Framework (CARF) and the Crypto-Asset Prudential Standards of the Bank for International Settlements (BIS).

What is changing and when?

Markets in Crypto-Assets Regulation (MiCA)

The highly anticipated MiCA Regulation is expected to enter into force in April 2023 after the vote of the European Parliament and its effects will run after a transition period of eighteen months, end of 2024.

The regulation will replace existing national frameworks and establish uniform rules for crypto-assets at EU level. A few of the changes brought by MiCA are:

  • It provides a catalogue of a total of ten services defined as ‘crypto-asset services’ and it does not apply to crypto-assets captured by existing financial services legislation (e.g., security tokens qualifying as financial instruments under MiFID II). Therefore, it would provide legal certainty for crypto-assets not covered by existing EU legislation;
  • It includes specific rules for stablecoins, including when these are ‘e-money’;
  • Establishes uniform requirements for transparency and disclosure regarding the issuance the of crypto-assets and the organisation and governance of Crypto-Assets Service Providers;
  • Prevention of market abuse;
  • Licensing obligation imposed on CASPs.

More details about MiCA

Transfer of Funds Regulation (TFR)

Presented as part of the future European AML/CFT legislative package, the European Commission proposed to revise the Transfer of Funds Regulation in order to extend the obligation of financial institutions to include information on beneficiary and originator for transfer of funds to crypto assets. TRF is the implementation of recommendation no.16 by the Financial Action Task Force (FATF) also known as the “travel rule”.

It is expected to come into effect together with MiCA at the end of 2024. Meanwhile, various regulatory technical standards and guidelines will be developed by European regulators to provide further detail on the TFR.

This Regulation is relevant based on the following points:

  • The scope of TFR will involve the transfer of crypto-assets;
  • It will require CASPs to send information about the sender and receiver with the transaction, for all transactions in crypto-assets.
  • Exception: TFR will not apply to private wallets and P2P transfers conducted without a provider.

Crypto-Assets Reporting Framework (CARF)

For the third relevant act, we will be looking at the new framework OECD has published in October 2022 in relation to crypto-assets reporting. Framework which is primarily based on the CRS model.

The CARF covers:

  • Crypto-assets subject to reporting;
  • Intermediaries and services providers subject to tax information reporting;
  • Transactions (and related information) subject to reporting; and
  • Due diligence procedures to identify crypto-asset users (directly or indirectly) and to determine the relevant tax jurisdictions for reporting and exchange purposes.

The three types of transactions subject to reporting are:

  • Exchanges between relevant crypto-assets and fiat currencies;
  • Exchanges between one or more forms of relevant crypto-assets;
  • Transfers (including retail payment transactions) of relevant crypto-assets.

More about CARF

BIS Prudential Standards for Crypto-Assets

At the beginning of 2023, BIS published its final prudential standards for bank’s exposures to crypto-assets, which will be implemented in January 2025.

Unbacked crypto-assets and stablecoins with ineffective stabilisation mechanisms will be subject to a conservative prudential treatment. Banks are required to classify crypto-assets on an ongoing basis into two groups:

  • Tokenised traditional assets and stable coins;
  • Tokenised traditional assets and stablecoins that do not meet classification conditions and unbacked cryptos.

These two groups will be subject to capital requirements and to other relevant requirements such as operational risk, adequate liquidity requirements, leverage ratio, large exposure, etc. 

More about BIS Standards

How would your business be impacted?

Banks and other financial institutions

For traditional and digital banks, for payment service providers and other financial institutions, the new crypto regulatory requirements will have a relevant impact and they must take the necessary steps to prepare.

Regardless if your institution includes crypto-asset service providers and cryptocurrencies into their risk appetite, services or products, you might still be impacted.

  • Crypto-assets pose a high risk of financial crime, therefore financial institutions need to make sure their due diligence measures are catered to the specificities of these products and clients;
  • Crypto-assets come with a high environmental impact, which means that if their clients are CASPs, banks will be dealing with ESG reporting obligations;
  • Since according to MiCA all CASPs will have to be licensed, banks, PSPs and others will need to put controls in place in order to prevent involving themselves in business with unlicensed and illegal CASPs;
  • Banks, PSPs and others will need to be informed of the new regulatory updates in order to identify any risks that their clients may face in relation to the use of cryptocurrencies. The high volatility of these products can also impact the liquidity of the client and therefore of the financial institutions.

Crypto-Asset Service Providers (CASPs)

All institutions active in the financial sector will be impacted by the new requirements, but the ones at the center of the regulations are the CASPs. MiCA, TFR, CARF and the BIS standards all cover certain rules through which CASPs are classified, they impose reporting requirements relating to their business, operations as well as capital and AML requirements.

As a consequence, CASPs are the first that need to make sure they have a proper risk and compliance framework in place by the time the regulations enter into force.

How can PwC help you in your journey?

Looking ahead to the future, it’s clear that the crypto industry is set for significant growth and change. To ensure that your organization is fully prepared, we have developed a range of solutions specifically designed to help you comply with the regulatory requirements and seize the opportunities that crypto-assets have to offer. While you mitigate the risks associated with crypto you can also make use of it to position yourself ahead of the curve compared to other financial players.

PwC offers multi-disciplinary teams with the depth of experience in legal & regulatory compliance, financial risk management and crypto and blockchain technology to help you achieve compliance with the new regulations, MiCA, TFR and CARF. 

How can PwC help you in your journey?
Formulate Crypto-Assets tailored Risk Appetites

Formulate Crypto-Assets tailored Risk Appetites

We can support strategic decision making concerning cryptocurrencies and service providers, and help you formulate risk appetites, find the right setup for your business and align it with regulatory requirements.

Compliance Framework updated to the requirements of the Crypto Regulatory Space

Compliance Framework updated to the requirements of the Crypto Regulatory Space

Our team of risk and regulatory experts can support you with assessing how MiCA, TFR or CARF will affect you and your clients, and assist you in updating your compliance and control frameworks to match the requirements.

Upskilling of workforce performed by our Crypto-Assets and Blockchain experts

Upskilling of workforce performed by our Crypto-Assets and Blockchain experts

The most important step in the preparation for the new crypto regulations is to make sure that the management and staff understand the theoretical, technical and regulatory implications. PwC can facilitate training programs/knowledge sharing sessions on Crypto-Assets/Blockchain and other related topics.

Support CASPs in acquiring a License

Support CASPs in acquiring a License

PwC has extensive experience with licensing. We can support you and your clients with acquiring the appropriate registrations and/or licenses. 


Implementation of new technology to monitor the Crypto Transaction chain

Implementation of new technology to monitor the Crypto Transaction chain

With the emergence of sophisticated blockchain technology, your company might also need to implement advanced technology in order to monitor the transaction flow of your bank or PSP in order to prevent financial crime facilitated by crypto-assets.

Market Practice insights and expert guidance

Market Practice insights and expert guidance

Given our knowledge and experience in the financial industry and the crypto market we can provide up-to-date information on crypto industry trends, best practices and regulatory developments to help you stay ahead of the curve.

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Contact us

Anthony Kruizinga

Anthony Kruizinga

Partner, PwC Netherlands

Tel: +31 (0)61 308 76 37

Iris Bootsma

Iris Bootsma

Manager, PwC Netherlands

Tel: +31 (0)68 267 74 15