The European Union Parliament Votes In Favor of Increased Regulation on Cryptocurrency
Despite backlash from industry participants, the EU parliament has voted in favor of rules that would effectively ban “unhosted wallets" - we assume they are referring to non-custodial wallets. The vague language of "unhosted wallets" likely also includes running one’s own node and connecting to that node.
This crackdown is a major blow for privacy-seeking bitcoiners in the EU and is effectively a ban on math and property rights. As we’ve explained in prior articles, holding one’s keys is essentially holding a VERY large number and enforcing this may prove to be difficult for the EU.
With that being said, we advocate good privacy practices and to buy Non-KYC bitcoin to avoid being collateral damage.
This new measure will require crypto services such as exchanges to collect personal details of individuals who use their services. The bill states:
1. The crypto-asset service provider of the originator shall ensure that transfers of cryptoassets are accompanied by the following information on the originator:
(a) the name of the originator;
(b) the account number of the originator, where an account is used to process the transaction;
(c) the originator's address, official personal document number, customer identification number or date, and place of birth.
These information requirements are fairly typical for exchanges to collect in order for an individual to purchase digital assets, what differs is the introduction of requiring information of the recipient of a transfer off of the exchange.
2. The crypto-asset service provider of the originator shall ensure that transfers of cryptoassets are accompanied by the following information on the beneficiary:
(a) the name of the beneficiary;
(b) the beneficiary's account number, where such an account exists and is used to process the transaction.
The current travel rule for fiat currency exchange has this requirement implemented for transactions greater than 1,000 euros, but they have done away with this limit regarding cryptocurrencies, stating in the Bill:
“Due to the specific characteristics and risk profile of crypto-assets, the information obligation should apply to crypto-assets transfers, regardless of the value of the transfer.”
This vote came after a debate among lawmakers and members of the crypto industry if non-custodial wallets should fall under KYC rules.
It is clear the EU will be able to pressure large exchanges such as Coinbase/Kraken and force compliance, as we saw Canada crack down on custodial services during the trucker campaign. How they plan to implement these restrictions on individuals holding digital assets in non custodial wallets remains to be seen. It would require a seemingly vast amount of resources to track AND prosecute any individuals outside of centralized services transacting peer to peer who did not follow these rules. Despite this, we suspect crackdowns like this to continue as the state continues to realize their monopoly of money may be coming to an end. This is why privacy practices are important. We will continue to post ways to improve your privacy practices with bitcoin.
In addition, the bill must also pass with national ministers who meet as the EU Council to be signed into law. Depending on backlash, the possibility exists that this bill does not get signed into law. We will continue to follow the story as it develops.