The European Union Votes to Ban Anonymous Crypto Transactions

The European Parliament has just voted to prohibit all anonymous crypto transactions – including from self-hosted wallets – facilitated through exchanges.

This year has waken up to a spurt in crypto rules and regulations all across the world. Parliamentarians from different part of the world have debated on the pros and cons of cryptocurrencies. Since El Salvador legalized Bitcoin (BTC) as legal tender, countries all over the world have exchanged different views to regulate the crypto industry. 

What Does The Law Say?

According to the latest pronouncement by the EU parliament, in order to address issues such as money laundering and terrorist financing threats represented by crypto-assets, any unspecified transaction will be banned. This rule will apply to transactions of any size, meaning both payers and recipients of even the smallest digital asset payment must be identified. The announcement stated,

“In order to address the money laundering and terrorist financing threats represented by crypto-assets, the proposed recast of Regulation (EU) 2015/847 will introduce an obligation for the crypto-assets services providers submitted to anti-money laundering and countering terrorism financing requirements in the Union legal framework, to collect and make accessible data concerning the originators and beneficiaries of the transfers of crypto-assets they operate.”

The announcement also proposed to scrap the floor for crypto payments, so payers and recipients of even the smallest crypto transactions would need to be identified, including for transactions with unhosted or self-hosted wallets. Further measures under discussion could see unregulated crypto exchanges cut off from the conventional financial system.

What Are The Views On The Law?

8/ This eviscerates all of the EU’s work to be a global leader in privacy law and policy. It also disproportionately punishes crypto holders and erodes their individual rights in deeply concerning ways. It's bad policy. Act now here: https://t.co/b3Ll3xXiW4

— Brian Armstrong – barmstrong.eth (@brian_armstrong) March 30, 2022

Brian Armstrong, CEO of U.S.-based crypto exchange, Coinbase, slammed the new law stating that it is a “Bad Policy” which disproportionately punishes crypto holders and erodes their individual rights. In a series of tweets, he said ,

“Any time you receive 1,000 euros or more in crypto from a self-hosted wallet, Coinbase will be required to report you to the authorities. This applies even if there is no indication of suspicious activity.”

Not all parliamentarians were in favor either. European Parliament member, Paul Tang, who chairs the Committee on Tax Matters responded that such concerns were overblown. He remarked,

“In today’s vote we will not be banning anything. Instead we oblige verification to prevent crime and corruption through unhosted wallets.”

7/ But it doesn’t say how exactly a crypto service provider should be able to verify the unhosted counterpart🤨

The consequence of this, imo, is that most crypto companies won’t be able or willing to transact with unhosted wallets anymore in order to stay compliant.

— Patrick Hansen (@paddi_hansen) March 26, 2022

Patrick Hansen – Business Dev at Defi wallet Unstoppable Finance – believes that the requirements will prove overburdensome, and stifle the growth of the space. He tweeted,

BREAKING: The ECON & LIBE committees of the EU Parliament voted in favor of the FTR compromises D & E that crack down on “unhosted” wallets.

Entire regulation draft to be voted on later today, but will certainly go through.

Breakdown of the vote & more updates in this thread.

— Patrick Hansen (@paddi_hansen) March 31, 2022

“Most crypto companies won’t be able or willing to transact with unhosted wallets anymore in order to stay compliant,”