European Union lawmakers have voted in favour of controversial proposals that require exchanges to collect personal data from individuals who transact more than EUR 1,000 using unhosted wallets.
Bad News for Exchanges
The proposals were passed, albeit narrowly, and purport to effectively prohibit anonymous crypto transactions:
The underlying justification behind the proposals is that they intend to extend anti-money laundering (AML) requirements that apply to conventional payments over EUR 1,000 to the crypto sector. As Coinbase CEO Brian Armstrong noted, however, the burden imposed on exchanges would be extremely onerous:
Most of the pushback from industry is because non-custodial wallets aren’t necessarily customers, with commentators describing the measures as “anti-innovation and anti-privacy”.
Referring to Chainalysis data showing that less than 0.05 percent of crypto volume was related to crime, hardware wallet provider Ledger argued that the proposals were neither necessary nor proportionate. It further noted that they reduced financial freedom, consumer protection and financial inclusion, and put Europe at a competitive disadvantage relative to other jurisdictions.
While some noted that users would simply resort to decentralised exchanges or send EUR 999 at a time, others had a more humorous perspective:
Turning Up the Regulatory Heat
This year has already shown that European lawmakers are increasingly scrutinising the digital asset sector. A few weeks ago, the EU Parliament finally decided not to ban proof-of-work cryptocurrencies (effectively Bitcoin), after going back and forth on the matter.
The next battle is clearly over unhosted wallets and for now it appears as if the regulators are in the driving seat. Importantly, the laws have not been enacted and still need to go through tripartite meetings between the EU Parliament, European Commission, and European Council.
Despite expectations that little will derail the proposals in question, if there is one thing we know about the crypto sector it’s that it will never go down without a fight.
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