The EU Commission is taking a hard look at whether to ban anonymous crypto wallets in Europe, forcing companies working in the blockchain space to gather information that identifies their users.
Commissioners put forward the new rules as part of an “ambitious package of legislative proposals to strengthen the EU's anti-money laundering and countering terrorism financing,” according to a press statement.
The laws would force exchanges and companies that allow the transfer of crypto-assets to collect details of both the recipient and sender. What this means is that any organization involved in buying, selling, or sending crypto would have to record the name, address, date of birth, and account number of the person sending the funds - as well as the name of the person receiving them.
However, the rules do not forbid “person-to-person transfer of crypto-assets”.
Currently, many wallets can be used to hold and transfer cryptocurrencies in relative anonymity without having to submit identifying information.
But larger exchanges like Coinbase already ask users to submit passports, driving licenses, or other documents which prove their identity. The new rules will extend similar requirements to all crypto companies in the EU.
“Given that virtual assets transfers are subject to similar money laundering and terrorist financing risks as wire funds transfers, it is to requirements of the same nature they must also be submitted and it, therefore, appears logical to use the same legislative instrument to address these common issues,” the Commission wrote.
The new rules will apply Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) rules to the whole of the crypto industry.
“At present, only certain categories of crypto-asset service providers are included in the scope of EU AML/ CFT rules,” the Commission added.
The proposed reform will extend these rules to the entire crypto sector, obliging all service providers to conduct due diligence on their customers.
“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. In addition, anonymous crypto asset wallets will be prohibited.”
The announcement has split the crypto community, with some hailing the rules as a step towards the mainstream adoption of blockchain-based currencies and others slamming them as an infringement on their liberty.
We spoke to Nick Jones, CEO of the Scotland-based crypto wallet and payments platform Zumo, who said: “Money laundering is an extremely serious issue so it’s only right and proper should be subject to regulatory oversight.”
He continues:
“With France recently proposing that the European Securities and Market Authority should regulate digital currency activity across the EU, it will be interesting to see whether these latest EU proposals could be the signs of further EU alignment on cryptocurrency activity.”
He said the crypto industry could “stand to benefit from joined-up thinking” that allows firms to operate across jurisdictions without an unnecessary regulatory burden.
“More widely, this news is another clear sign of the way the wind is blowing, following regulatory action in the UK and the current scrutiny of stablecoins in the US,” he added. “Regulation has begun to be seen as a positive and necessary thing on the road to mainstream adoption. In our view, the winners will be those that have collaborated with regulators in good faith and get all the proper licensing in place before time.”
Social media users reacted angrily to the proposal, with several people tweeting that this was “the end” for crypto.
“Bitcoin is not EU money but FU money,” a person with the Twitter handle @bitcoin_al wrote, nodding to the anti-establishment strain of thinking inside some wings of the crypto world.”
On Reddit, the EU’s plans were also heavily criticized.
“Bitcoin is a breakaway from their hegemony, why would you think they won't go after it in any way possible?” a Reddit user called Yungheathledger asked.
“They just want to make you feel like a criminal as much as possible, so that most people refrain from buying crypto and even if they do, to keep in on the exchange (which is still under their control),” another added.
A user called Oldskoolr likened the EU proposal to “rulers from the 2nd dimension coming together and banning something that exists in the 3rd dimension”.
