Crypto exchanges should lose their licenses if found to have seriously breached anti-money laundering rules, European Union financial supervisors said.

The recommendation comes as lawmakers reach the closing stages of landmark legislation known as the Markets in Crypto Assets Regulation, or MiCA, introducing an authorization regime for virtual asset companies within the 27-nation bloc.

Regulatory authorities responsible for authorizing or registering crypto exchanges and wallet providers should “be empowered to withdraw the authorisation/registration for serious breaches of AML/CFT [anti-money laundering and terrorist finance] rules,” said a report published Wednesday by the three European supervisory authorities responsible for overseeing banks, insurers and securities markets.

MiCA should “appropriately integrate AML/CFT issues in prudential supervision of entities”, said the report, which is looking at whether the anti-money laundering powers contained in rules for different financial sectors are up to scratch. MiCA introduces requirements for stablecoin issuers to hold sufficient capital reserves and to be monitored by regulators such as Germany’s BaFin.

One of the remaining wrinkles in the legislation concerns whether it should include stronger AML controls, or leave the issue for a separate, wider review of dirty money rules.

Major players such as Binance, the largest crypto exchange by volume traded, are now registered in EU countries like France and Italy, while the bloc is toughening its AML laws in the wake of a string of scandals affecting conventional lenders such as Danske Bank and Malta’s Pilatus.

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