EU Votes to Ban Anonymous Crypto Transactions with a Crackdown on Unhosted Wallets

The European Union is looking to ban anonymous cryptocurrency transactions, tightening its crackdown on money-laundering and terrorism financing to protect its citizens and the bloc’s financial system.

 

Politicians in Brussels have voted overwhelmingly in favor of a crackdown on unhosted wallets.

 

An unhosted wallet is a term used by the Financial Action Task Force and Financial Crimes Enforcement Network and adopted by other government and regulatory bodies. It means that an individual maintains their own private keys — known in the crypto industry as a “non-custodial wallet” or “self-hosted wallet” to delineate between assets controlled by a financial institution acting as a custodian and an individual.

 

This proposed measures would mean that those who send and receive crypto transactions will need to be identified by exchanges.

 

And whereas these anti-money laundering requirements are only in force for fiat payments over €1,000, no minimum threshold is going to apply to crypto.

 

Critics of the EU regulations have warned that crypto exchanges will find it impossible to verify the owners of unhosted wallets.

 

Because of this, trading platforms may stop their users from transacting with unhosted wallets altogether in order to remain compliant.

 

Others have claimed this amounts to an invasion of privacy — and the traceability of blockchains means that this approach is heavy-handed.

 

Crypto exchanges had been urging European investors to contact politicians to raise their concerns before the vote took place.

 

Earlier this week, Coinbase’s chief policy officer Faryar Shirzad had warned the measures “could significantly violate individual financial freedom, irreparably harm the cryptoeconomy, and stifle the future of innovation across the EU.”

 

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Crypto Industry Tries to Fights back

Ledger’s chairman and CEO, Pascal Gauthier, says the European Parliament has chosen “fear over freedom” — and these measures will “pave the way for a massive surveillance regime over Europe’s financial landscape.”

 

He warned the regulations will effectively create a registry of wallet addresses and enable the EU to monitor the crypto transactions of law-abiding citizens in real time.

 

Gauthier also fears “the Web3 revolution won’t happen in Europe.” as a result of this new law — preventing the formation of a brand-new industry that would generate thousands of jobs, and undermining the trading bloc’s competitiveness. He wrote:

“We need smart regulations tailored to specific problems, NOT wholesale bans and massive government intrusions into citizens’ private lives.”

 

While Gauthier said that Ledger was “disappointed” by the outcome of the vote, he stressed that the company “will continue to advocate for sound policies that empower individuals and create the environment for Web3 to flourish in Europe..”

 

The setback may have been a driving force in Bitcoin’s performance over the past 24 hours, with the world’s biggest cryptocurrency plunging 4.33%.

 

BTC fell to lows of $44,403 in the early hours of Friday morning, but had rebounded above $45,000 at the time of writing.