Controversial EU Cryptocurrency Law Unsettles Crypto Community

On March 31, the European Union (EU) parliament voted in favor of rules that targeted non-custodial or unhosted wallets. The Committee on Economic and Monetary Affairs alongside The Committee on Civil Liberties, Justice, and Home Affairs agreed on anti-money laundering requirements for the cryptocurrency space.

The new rules require cryptocurrency service providers to collect personal details of anyone who transacts over €1,000 of cryptocurrency using unhosted wallets. Otherwise, a transaction wouldn’t be allowed. The legislators aimed to ensure traceability of these transfers to identify possible suspicious transactions.

In detail, unhosted wallets are addresses controlled by individuals rather than crypto exchanges. It is a term used by the Financial Action Task Force and Financial Crimes Enforcement Network.

Two members of the European Parliament showcased their stances on the matter via Twitter. Markus Feber shared that the ban would be unnecessary and disproportionate. On the other hand, Paul Tang says the rule isn’t a ban but rather a verification process.

The worst aspect of some EU policies is that optics seem to matter most.

No one who understands #Bitcoin thinks that the EU POW-ban would have had a positive impact on sustainability.

No one who understand crypto thinks that the new TFR rules will have a positive impact on AML.

— Patrick Hansen (@paddi_hansen) April 1, 2022

Meanwhile, Bitfinex CTO Paolo Ardoino expressed his disappointment that the proposal had passed. In a thread of tweets, Ardoino said that the law wasn’t for consumer protection but rather a step back for human rights.

1/ 🇪🇺🚨
Disappointed to see the proposal on self hosted wallets passed today and hope the final vote on the report will take into consideration security risks and privacy violations that will transpire if enacted into law.

— Paolo Ardoino (@paoloardoino) March 31, 2022

Similarly, Coinbase Chief Executive Officer and Co-Founder Brian Armstrong, in a thread of tweets, spoke of how the rule was “anti-innovation, anti-privacy, and anti-law enforcement” before urging people to contact members of the parliament.

1/ On 31 March, the EU Parliament will vote on its proposal for a new crypto surveillance regime. The proposal is anti-innovation, anti-privacy, and anti-law enforcement. Make your voice heard and contact your member here: https://t.co/b3Ll3xXiW4

— Brian Armstrong – barmstrong.eth (@brian_armstrong) March 30, 2022

One of the most prominent voices of this issue comes from Unstoppable DeFi’s Head of Strategy and Business Development Patrick Hansen. Hansen has made extensive threads regarding the issues of this new law.

1/ I hate to ring the alarm bell again, but the EU Parliament leaves us no choice 🚨🚨

This time it concerns a crackdown on unhosted wallets in the upcoming crypto AML regulation (TFR).

The ECON committee vote is on Thursday and the draft includes some absolute red flags 👇

— Patrick Hansen (@paddi_hansen) March 26, 2022