Understand AML Requirements: Fiat, Digital Assets & Crypto Assets
Digital and crypto assets have become part of everyday life, offering new ways to invest, transact, and engage with financial services. Their rise reflects a growing public appetite for innovation and decentralization, but it also brings challenges that regulators can’t ignore. To protect consumers and maintain trust in the financial system, authorities are tightening anti-money laundering (AML) rules, requiring crypto platforms to verify users, monitor transactions, and report suspicious activity just like traditional banks.
While fiat currency still plays a central role in this landscape. Backed by governments and central banks, it offers stability, legal recognition, and the ability to manage economies through monetary policy. While crypto brings exciting possibilities, fiat remains the anchor of global finance. The challenge now is finding the right balance—where digital assets can thrive alongside fiat, under rules that protect people and preserve confidence in the system.
In this article, the SALVUS Regulatory Compliance team compares fiat currencies, digital assets, and crypto assets through the lens of the EU’s AML directives and the MiCA regulation. It explains how each asset type is defined, the risks they pose, and the regulatory obligations of Crypto-Asset Service Providers (CASPs).
1. What is a Fiat Currency?
2. What is a Digital Asset?
3. What are Crypto Assets and Crypto-Asset Service Providers?
4. What are the money laundering risks for crypto assets and digital assets?
5. How can SALVUS assist your CASP registration?
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1. What is a FIAT Currency?
Fiat currency is any legally established currency issued by a recognized authority, such as:
- EU Member State’s Central Bank
- European Central Bank (ECB)
- Legal issuer outside the EU
Fiat currencies derive their value from trust in the issuing authority and are influenced by supply, demand, and economic stability. Major examples include the Euro and the U.S. dollar. These currencies are not backed by physical assets but are supported by strong governance and regulatory frameworks, making them essential to global trade and financial stability.
2. What is a Digital Asset?
A digital asset refers to any asset that is created, stored, or transferred using Distributed Ledger Technology (DLT) or Blockchain Technology. These assets exist in digital form and are secured through cryptographic methods, making them programmable, traceable, and often decentralized.
Digital assets typically fall into four main categories:
- Crypto assets: These include cryptocurrencies like Bitcoin and Ethereum, which are decentralized and often used for peer-to-peer transactions.
- Stablecoins: Digital currencies pegged to stable assets like fiat currencies (e.g., USD), designed to reduce volatility.
- Non-Fungible Tokens (NFTs): Unique digital items representing ownership of specific assets, often used in art, gaming, and collectibles.
- Security tokens: Digital representations of traditional financial instruments like stocks or bonds, subject to securities regulations.
Additionally, Central Bank Digital Currencies (CBDCs) are emerging as digital versions of fiat currencies, issued and regulated by central banks. Unlike other digital assets, CBDCs are centralized and aim to combine the efficiency of digital transactions with the stability and trust of traditional fiat systems.
3. What are Crypto Assets and Crypto-Asset Service Providers?
A crypto asset is a digital representation of value or rights that can be transferred and stored electronically using blockchain or distributed ledger technology (DLT). It is not issued or guaranteed by a central bank, does not have legal currency status, and may or may not be linked to fiat currency.
A CASP is any individual or business that provides crypto-related services, such as trading, custody, exchange, or advisory professionally to third parties. Under the EU’s MiCA regulation, CASPs operating in or from the EU must be authorized and comply with strict rules on transparency, governance, and anti-money laundering (AML).
In Cyprus, CASPs are now officially classified as financial institutions. They must be register with CySEC and obligated to conduct Customer Due Diligence (CDD), monitor transactions, and report suspicious activity.
4. What are the Money Laundering risks for Crypto Assets?
Regulating crypto assets became essential due to their unique money laundering risks. Here are the key Money Laundering Risks of Crypto Assets:
- Limited Identity Transparency – Many crypto transactions conceal user identities, making it easier for bad actors to move illicit funds undetected. Some platforms offer enhanced privacy features that further obscure transaction details.
- Instant Global Transfers – Digital assets can be sent across borders in seconds, bypassing traditional banking systems and regulatory checkpoints, which complicates international oversight.
- Unregulated or Lightly Regulated Platforms – Some crypto exchanges and wallet providers operate in jurisdictions with weak AML oversight, creating gaps in enforcement and supervision.
- Rapid Innovation & Lack of Standardization – New crypto products and services often outpace regulation, leaving vulnerabilities in AML compliance frameworks.
The risks linked to crypto and digital assets, such as anonymity, fast cross-border transfers, and limited oversight, create barriers to their acceptance in legitimate financial activities. These concerns are expected to be addressed through strong AML regulations and controls, which aim to improve transparency, trust, and compliance across the sector.
In Cyprus, Crypto Assets legal framework is governed by Prevention and Suppression of Money Laundering Law, updated in Law 96(I)/2025, fully aligned with EU Regulations 2023/1113 and 2023/1114 under the MiCA (Markets in Crypto-Assets) framework.
5. How can SALVUS assist your CASP registration?
At SALVUS, we consider Cyprus to be the most suitable jurisdiction for establishing a Crypto Asset Service Provider (CASP), with the CySEC CASP regime standing out as the European regulatory framework most closely aligned with MiCA. This alignment enables CASP entities registered in Cyprus to benefit from a smoother and more favorable transition from CySEC registration to MiCA authorisation.
The SALVUS Licensing Team, has successfully registered several CASPs under CySEC, gaining unmatched first-hand experience with the regulator’s policies and procedures. We leverage this expertise to guide clients in selecting the crypto-asset services that best fit their business model and strategic objectives. Employing a project management approach, we assist in gathering the required documentation, completing all necessary application forms, and managing communications with the regulator to ensure all preconditions are met.
Common areas of concern include restrictions on client orders, arbitrary cancellation clauses, or asymmetric slippage practices. Firms must be able to demonstrate that best execution is achieved continuously, fairly, and consistently, regardless of client category or business model.
Being compliant is always more cost-effective than being non-compliant. A strong best execution framework not only ensures adherence to regulatory standards but also strengthens client confidence and the firm’s reputation in the market.
In partnership with the Institute for Professional Excellence (IforPE), SALVUS proudly presents a self-paced CPD course titled Understand AML Requirements: Fiat, Digital Assets & Crypto Assets, introduces the learner to the specifics of Digital and Crypto Assets and how they compare to Fiat Currencies through the perspective of the Anti-Money Laundering (AML) framework.
Please contact us at compliance@salvusfunds.com if you require support with your AML/CFT regulatory compliance obligations or are interested in our IforPE courses.
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Should you be interested to read more about Organizational & Operational Requirements, AML compliance or the Compliance Function requirements please visit the selected articles below:
- Offering Crypto-Asset Services Through Your CIF: Key Insights
- Roadmap to Markets in Crypto-Assets (MiCA) Regulation in 2025
The information provided in this article is for general information purposes only. You should always seek professional advice suitable to your needs.