The crypto industry has reacted violently against a European Parliament committee that voted on a regulatory package for stricter know-your-customer (KYC) and anti-money laundering (AML) rules for “non-hosted” private wallets.
The new guidelines would require crypto service providers – most commonly exchanges – to verify the identity of anyone behind an unhosted wallet who interacts with them, while any transaction over €1,000 ($1,100) would have to be reported to authorities.
Coinbase CEO Brian Armstrong vented his frustration at the move via Twitter, drawing comparisons to Fiat to highlight the absurdity of reporting and verifying a $1,000 transaction:
“Imagine if the EU required your bank to report you to the authorities every time you paid your rent just because the transaction was over 1,000 euros. Or if you sent your cousin money to help him shop, the EU required your bank to collect and verify private information about your cousin before you were allowed to send the money.”
“How could the bank even keep up? The banks would push back. We’re going to do that now,” he added
8/ This negates all of the EU’s work to be a world leader in data protection law and policy. It also disproportionately penalizes crypto holders and undermines their individual rights in deeply worrying ways. It’s bad politics. Act now here: https://t.co/b3Ll3xXiW4
— Brian Armstrong – barmstrong.eth (@brian_armstrong) March 30, 2022
The proposal was part of an amendment to the money transfer regulation approved by Economic and Monetary Affairs (ECON) and the Committee on Civil Liberties, Justice and Home Affairs (LIBE) on March 31.
For the new rules to come into effect, they will need to be passed in trilogue negotiations between the EU Parliament, the European Council and the European Commission, and if unopposed, that would give the crypto industry nine to 18 months to finalize the regulations fully comply with legislation.
Chairman and CEO Pascal Gaunthier of digital wallet firm Ledger also didn’t mince words, stating that “the European Parliament has chosen fear over freedom”:
“A new regulation has just been voted on, paving the way for a massive surveillance regime over Europe’s financial landscape.”
Today the European Parliament chose fear over freedom.
A new regulation has just been voted on, paving the way for a massive surveillance regime over Europe’s financial landscape.
— Pascal Gauthier (@_pgauthier) March 31, 2022
The regulatory news appears to have had a significant impact on the price of Bitcoin (BTC), with the asset’s price falling 4.5% over the past 24 hours to $45,243 at the time of writing. Ether (ETH) is also down 3.7% to $3,282 over the same period.
European decentralized finance (DeFi) company Unstoppable Finance lamented the news and expressed it hopes that proposals will be shot down in the forthcoming negotiations.
“The changes are a major setback for crypto in the EU and should be overturned in the trilogues,” the firm stated.
Today, the EU Parliament voted in favor of measures that raise significant concerns for both individuals and the crypto ecosystem. If ultimately approved, these new measures will raise fundamental issues of privacy, innovation and access.
Full explanation below. pic.twitter.com/kjaeWxftz5
— Crypto Council for Innovation (@crypto_council) March 31, 2022
Related: European “MiCA” regulation on digital assets: where do we stand?
Patrick Hansen, head of strategy and business development at Unstoppable Finance, also took to Twitter to vent his anger, calling the proposals a “huge disappointment and a huge threat to individual privacy.”
“It introduces unworkable wallet verification requirements and unwarranted reporting requirements for crypto businesses that would have massive adverse effects on both EU citizens and businesses.”
Noting that it is difficult, if not impossible, for crypto service providers to verify a “non-hosted” counterpart, he warned that some companies may want to cancel transactions with non-hosted wallets altogether to stay compliant and maintain their legal position not to endanger. Other, smaller ones might find the potential operational costs of compliance too expensive and leave them to the larger incumbent players, leading to further market consolidation
But also Hansen written down that he is optimistic that the rules could at least be watered down in the trilogue negotiations as “some Commission/Council members have voiced criticism” of the rules.
Final update on the vote for today: the final committee votes on the whole draft and mandate to start trilogue negotiations are in and the results are as clear as expected.
These updates have been added to the earlier thread for voting. https://t.co/7NT6PxdDSB
— Patrick Hansen (@paddi_hansen) March 31, 2022
https://cointelegraph.com/news/crypto-industry-pushes-back-after-eu-vote-to-block-unhosted-wallets Crypto industry hits back after EU vote to block ‘unhosted’ wallets