Yesterday, members of the European Union Parliament approved new regulatory measures that would prevent any anonymous cryptocurrency transactions. They agreed to a proposal that would require cryptocurrency service providers, such as exchanges, to collect KYC information from individuals moving more than 1,000 euros to so-called “unhosted cryptocurrency wallets.”
Unhosted wallets refer to non-custodial wallets, which do not rely on third parties. A few examples of non-custodial wallets include MetaMask and Ledger.
“Under the new requirements agreed by MEPs, all transfers of crypto-assets will have to include information on the source of the asset and its beneficiary, information that is to be made available to the competent authorities,” a statement posted on the European Parliament website read.
The proposal has received an outcry from prominent members of the crypto community. Coinbase CEO Brian Armstrong tweeted that under the new rule, Coinbase would have to report transfers of 1,000 euros from a self-hosted wallet to authorities.
The EU’s latest move runs in opposition to financial privacy (something almost universally guaranteed in the traditional financial system). That might seem surprising at its face given the EU’s progressiveness on data privacy and protection. However, the EU knows that where there is money to be made, there are often bad people. The proposal is likely meant to contest with money launderers, tax evaders, and other users participating in illicit activities. However, seeing as though the blockchain is far and expansive, it wouldn’t be hard for the lay-maxi to hit these quotas.
90 lawmakers voted in favor of banning the tiniest anonymous cryptocurrency transactions, some members of the center-right European People’s Party (EPP) opposed many of the recommendations.
In an interview with CoinDesk, EPP economic spokesperson Markus Ferber said, “With this approach of regulating new technologies, the European Union will fall further behind other, more open-minded jurisdictions.”
Separately, another legal proposal discussed would prohibit payments to crypto service providers that are not compliant, such as those operating in the EU without authorization or those not affiliated with or established in any jurisdiction.
The legislation has yet to be approved in a tripartite process before it can be formally adopted by the EU Parliament, European Commission, and European Council. Although it remains to be seen whether the EU Parliament will listen to the crypto community or not, this vote demonstrates how complicated and difficult regulating cryptocurrencies can be — which is a warning bell for U.S. authorities attempting to regulate this market.