Portugal Moves to Regulate Crypto Assets, Citing Money Laundering Risks and EU Compliance
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Portugal has taken a significant step toward regulating the burgeoning cryptocurrency market, enacting legislation to implement three key European regulations, including the landmark Markets in Crypto-Assets (MiCA) framework. The move, signed into law by President Marcelo Rebelo de Sousa on December 5th, aims to address concerns surrounding money laundering, terrorist financing, and the overall stability of the digital asset ecosystem.
Presidential Reservations and the Imperative of Compliance
President Rebelo de Sousa acknowledged “reservations” regarding the “nature, function, taxation, systemic risks and effectiveness of regulatory control” surrounding cryptocurrencies, echoing concerns previously voiced by the European Commission. According to a statement released by the Presidency of the Republic, the Commission itself has identified shortcomings in existing European oversight, particularly before the strengthening of the European Financial Mechanisms Authority (ESMA).
Despite these reservations, the President opted to promulgate the decrees, citing three primary justifications: avoiding potential penalties for non-compliance with EU regulations, recognizing that some level of control is preferable to none, and empowering the Bank of Portugal and the Securities Market Commission (CMVM) with additional regulatory authority.
New Laws Target Money Laundering and Implement MiCA
The approved legislation comprises three distinct decrees. The first focuses on combating money laundering and terrorist financing within the digital asset space, transposing European regulation 2023/1113 into Portuguese law. This decree received support from a broad coalition of political parties, including PSD, CDS-PP, PS, Chega, Livre, PAN, and JPP, while PCP, BE, and IL abstained.
The second decree directly implements the rules outlined in European regulation 2023/1114, commonly known as MiCA, into Portuguese legislation. This received favorable votes from PSD, CDS-PP, PS, Chega, IL, PAN, and JPP, with PCP and BE voting against and Livre abstaining.
The final decree implements European regulation 2024/886, concerning immediate credit transfers in euros, and was approved by PSD, CDS-PP, PS, Chega, IL, Livre and JPP, with PCP, BE and PAN abstaining.
Enhanced Scrutiny for Crypto Service Providers
Under the new rules, cryptoactive service providers based in Portugal and authorized to operate within the country will be classified as financial entities as of July 1, 2026. This designation subjects them to the same rigorous oversight and compliance requirements currently applied to traditional banks, specifically concerning the prevention of money laundering and terrorist financing.
Financial entities will be obligated to conduct thorough due diligence in cases flagged as “high risk,” requiring them to trace the entire flow of funds or crypto-assets and identify all parties involved to ensure only authorized entities participate in transactions.
The legislation clarifies the division of regulatory responsibilities within Portugal, assigning control over the sector between the Bank of Portugal (BdP) and the Securities Market Commission (CMVM). It also establishes clear guidelines for cooperation between these two national supervisors and their respective counterparts at the European level.
This coordinated approach aims to ensure comprehensive and effective oversight of the rapidly evolving crypto asset landscape, balancing innovation with the need to mitigate financial risks and maintain market integrity.
