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The European Union (EU) parliament has today voted in favor of new harsh rules that call for the crackdown of unhosted or non-custodial wallets. This is a big blow for cryptocurrency privacy advocates in Europe.
EU Parliamentarians Vote In Favor Of Anti-Anonymity Rules
The ECON and LIBE committees on March 31 voted to approve an anti-money laundering and transfer of crypto assets proposal that could have negative implications for crypto-related companies and investors in the European Union.
Although votes on the amendments to the Transfer of Funds Regulation were close, the final draft was overpoweringly approved.
The new measures will require crypto services providers, such as exchanges, to collect the personal details of individuals who transact over 1,000 euros of crypto using self-hosted wallets before the transfer is allowed. Self-hosted wallets are basically those that are not held by third-party intermediaries, the likes of Trezor, Ledger, and MetaMask.
The vote today comes after heated discussions among lawmakers and members of the crypto industry regarding whether non-custodial wallets should be bound by the know-your-customer (KYC) nightmare that obliges companies to obtain personal information about wallet users.
The next step now is for the new legislation is to go through trilogue talks between representatives of the European Parliament, the European Council, and the European Commission as early as mid-April. This will present a window of opportunity for the controversial legislation to be challenged and revised.
New European Crypto Rules Face Significant Blowback
Unsurprisingly, the proposed rules have drawn the ire of the crypto community. Brian Armstrong, the CEO of San Francisco-based crypto exchange Coinbase noted that the legislation is “anti-innovation, anti-privacy, and anti-law enforcement.” He added that the proposal essentially treats cryptocurrency differently from fiat currency.
5/ Moreover, 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.
— Brian Armstrong – barmstrong.eth (@brian_armstrong) March 30, 2022
“Imagine if the EU required your bank to report you to the authorities every time you paid your rent merely because the transaction was over 1,000 euros,” Armstrong posited.
Tether and Bitfinex CTO Paolo Ardoino said he was bummed the proposal was passed Thursday, arguing that it “represents a big step back for human rights.” He hopes the final vote on the draft can consider the potential privacy breaches and security risks that could ensue if it’s enacted into law.
Some lawmakers are also opposed to the proposed regulations. Markus Ferber, the economic spokesperson for the European People’s Party (EPP) agrees AML checks in crypto should be taken seriously, but suggested that the new rules are commensurate to an outright ban on self-hosted wallets.
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