Cryptocurrency exchanges should lose their licenses in case of severe breaches of anti-money laundering (AML) rules, EU regulators have recommended in a report on June 1.

The joint report published by three EU regulatory bodies recommends adding the provision to withdraw licenses to all relevant legislation, including the Markets in Crypto-Assets (MiCA) regulation. EU’s digital asset regulation MiCA is currently under negotiation.

The report states that authorities granting registration or licenses to digital asset firms should be “empowered to withdraw the authorization/registration for serious breaches of AML/CFT rules.”

However, licenses will be rescinded only as a last resort, subject to a discretionary and proportionality assessment, the report said.

In other words, it will be up to the concerned regulator to determine on a case-by-case basis what constitutes a serious breach and judge whether the license needs to be revoked.

The report explores whether the AML and combatting the financing of terrorism (CFT) rules are up to the mark across the financial sectors.

The addition of this recommendation to MiCA could make the impending EU regulation more stringent. MiCA dictates, among other rules for crypto firms, that stablecoin issuers need to hold enough reserves and be closely monitored by regulators like Germany’s BaFin.