- The EU parliament yesterday voted on extending their oversight of crypto transactions
- Any cryptocurrency transactions over €1,000 in value that involve exchanges will have to be accompanied by personal information
- The personal information will have to be verified by the exchange before it is allowed
The EU Parliament yesterday voted 58 to 52 to strip the anonymity of certain cryptocurrency transactions, potentially meaning the end to private transactions that involve exchanges. The vote to change the EU Commission’s anti-money laundering (AML) package means that any user of a private, non-custodial wallet sending to or receiving funds from an account on an exchange might have to prove their identity before the transaction can take place, raising all sorts of privacy and safety issues. While the rule is not a ban on private wallets, it does hamper their usage.
Intrusive Changes Pose Security Risks
The crypto world was alerted to the vote to revise the proposed Transfer of Funds Regulation (TFR) bill earlier this week, with the revision to the anti-money laundering bill shocking crypto users with its severity.
The prior version of the bill would have required private wallet users to hand over their personal details, including their name and physical address, to an exchange should they send over €1,000 worth of cryptocurrency to one or receive this amount of funds from one, no matter who the other party. Having such huge amounts of personal data on exchanges, and to have it connected to cryptocurrency addresses, is simply a recipe for disaster and a honeypot for hackers.
Exchanges Will Buckle Under New Demands
The proposed ruling was considered intrusive enough already, but the revision, which was passed yesterday with two abstensions, means that exchanges must now also verify the information provided before they approve it.
How this rule change will play out on a practical basis is simply unknown at this point, but it would see exchanges swamped with demands that are not placed on traditional banks, with many forced to take on entire new departments to handle these demands. This would result in many passing the financial burden on to the same customers that the EU is driving to drive towards them.
The entire draft regulation will be voted on later today, but there is no expectation that it will not be passed. Following this there is a further session where changes can still be implemented, which could see the ruling confirmed in a few months.
New Crypto Rules Are Not a Private Wallet Ban
It must be noted that the bill is not a ban on private wallets, with no provision in place to stop peer-to-peer crypto transfers continuing in the same manner, and there is little clarity as to what will happen when a non-EU entity transacts with an EU-entity.
It is clear however that the EU is determined to have all cryptocurrency transactions that have an aspect of fiat conversion to be conducted where they can see them, no matter the security or privacy considerations for users.