Until now, the European Union has adopted a friendly attitude towards cryptocurrencies. Few practices around crypto are fully banned in there. However, this can partially change in the next years. Now, the European Commission is considering banning non-identified crypto-wallets and related transactions.
According to a report by Reuters, some European policymakers proposed on Tuesday a law to apply the “travel rule” on crypto transactions. This would imply that the users won’t be able to deposit, withdraw or transact coins from or to their own (non-identified) wallets, but only between different crypto exchanges.
For their part, the crypto exchanges operating inside the European Union will need to gather their customers’ data. This include names, IDs, addresses, dates of birth, and account numbers. Likewise, the customer will need to identify the recipient(s) of their transactions. The service provider of the recipient will need to check for the same data.
So, basically, Europe is trying to ban anonymous crypto-wallets to make the transactions fully traceable. As described by the official statement:
“Today’s amendments will ensure full traceability of crypto-asset transfers, such as bitcoin, and will allow for prevention and detection of their possible use for money laundering or terrorism financing (…) These proposals have been designed to find the right balance between addressing these threats and complying with international standards while not creating excessive regulatory burden on the industry.”
For now, the said law is far from being approved. It has to go through the European Parliament and member states first, which could take a couple of years.
Privacy and crypto-wallets in Europe
The idea didn’t come from European Commission, though. Some months ago, in a preliminary update of their new recommended policies, the Financial Action Task Force (FATF) advised its member nations to do so. However, they had to postpone their final guide for October. That’s because the first draft received harsh critics for attempting against privacy.
By then, Peter Van Valkenburgh, Research Director at Coin Center, commented about it:
“Those requirements may be reasonable for banks and other financial institutions where most money laundering takes place, but they are absolutely inappropriate for private persons participating in open computer networks. The penalties for non-compliance are extreme and the bulk data collection would destroy personal privacy and constitutional rights against warrantless surveillance.”
Indeed, according to the analytics firm CipherTrace, only 1% of Bitcoin transactions are “risky” (in the criminal sense). And only 0.1% of transacted Bitcoin value is “risky”. Besides, Bitcoin, Ethereum, and a lot of other cryptocurrencies aren’t anonymous at all. Every transaction can be already traceable inside their blockchains. Therefore, this drastic measure in Europe seems unjustified. But we’ll have to wait a bit longer to see the final results.
Featured Image by Lolame / Pixabay
Originally published at https://blog.alfa.cash on July 20, 2021.