The growing global popularity and development of the crypto-asset market have prompted both states and supranational entities to issue specific regulations for these assets. In this context, the European Union (EU) has, in recent years, focused on regulating crypto-assets comprehensively through the Markets in Crypto-Assets Regulation (MiCA) and establishing specific measures for cross-border supervision of these assets and Anti-Money Laundering and Counter-Terrorist Financing (“AML/CFT”) through Regulation (EU) 2024/1624.
The latter regulation holds particular relevance for Paraguayan clients of EU-based crypto-asset service providers and for EU-based investors and entities seeking to expand their operations into Paraguay.
Regulation (EU) 2024/1624 obligates entities established or domiciled within the EU to assess whether individuals or entities established or domiciled outside the EU adhere to AML/CFT procedures compatible with EU regulations. This makes it essential to analyze the compatibility of Paraguay’s local regulatory framework with the EU's AML/CFT requirements.
It is therefore relevant to analyze the compatibility of the local regulatory ecosystem for ML/FT prevention with Regulation (EU) 2024/1624.
In Paraguay, the AML/CFT regulatory framework concerning crypto-assets consists of Law No. 1015/97, titled "Preventing and Suppressing Illegal Acts Aimed at Money or Asset Laundering" (the "AML/CFT Law"), and its amendments, along with decisions issued by the Secretariat for the Prevention of Money Laundering (“SEPRELAD”, as per its Spanish acronym).
Paraguay’s AML/CFT Law, particularly Chapter III, outlines the basic guidelines and policies that obligated entities must incorporate into their internal prevention, risk mitigation, and transaction detection measures. These measures follow a risk-based approach and consider the context, in line with SEPRELAD’s regulatory guidelines.
Additionally, SEPRELAD has issued three key decisions to date related to AML/CFT measures for individuals and entities providing crypto-asset services.
Decision No. 8/20 designates individuals or entities engaged in activities such as mining and managing virtual assets—or providing financial services related to them—as obligated entities under the AML/CFT Law. Decision No. 9/20 requires these obligated entities to incorporate evaluation, analysis, and control factors to manage exposure to money laundering and terrorist financing risks and mitigate associated risks.
Finally, SEPRELAD Decision No. 314/21 mandates obligated entities to implement a comprehensive AML/CFT prevention system through a regulatory framework governing the activities outlined in Decision No. 8/20. This decision is the most significant document for assessing the compatibility between Regulation (EU) 2024/1624 and Paraguay’s AML/CFT regulations.
Both Regulation (EU) 2024/1624 and SEPRELAD Decision No. 314/21 contain practically identical and, therefore, compatible provisions regarding the following AML/CFT control aspects: (i) customer due diligence measures, including simplified and enhanced due diligence; (ii) inability to fulfill the requirement to apply customer due diligence measures; (iii) identification and verification of the customer's and ultimate beneficial owner's identity; (iv) continuous monitoring of business relationships and customers' operations; (v) regulatory technical standards regarding the information required for conducting customer due diligence; and (vi) measures to mitigate risks related to transactions involving crypto-assets.
In conclusion, Paraguay’s AML/CFT regulatory framework for crypto-asset-related services aligns with the EU's AML/CFT regulations. Therefore, from a regulatory standpoint, Paraguay positions itself as an attractive destination for European crypto-asset service providers, offering a compatible and favorable framework for acquiring clients and expanding operations in the region.
