EU Parliament Approves Contentious Proposal That Infringes Privacy

Saif Naqvi
Source: Pixabay

The European Parliament has approved a controversial proposal that curbs anonymous crypto transactions, taking a step backward with respect to crypto innovation and privacy.

Source: Twitter

The Economic and Monetary Affairs (ECON) and Civil Liberties, Justice and Home Affairs (LIBE) voted to approve amendments to its Transfer of Funds Regulation that would require crypto exchanges to verify the identities of ‘unhosted wallets’.

Source: Twitter

The rules target wallets whose private keys are held by the funds’ owner, known as ‘unhosted wallets’, and require firms to monitor crypto transactions beyond their customers.

On a macro level, the EU’s latest directions are intended to extend anti-money laundering requirements that apply to crypto payments over EUR 1,000 ($1,114). However, the new rules scrap minimum requirements for such transactions, meaning that even the smallest crypto transactions would need to be identified. This includes transactions with unhosted or self-hosted wallets.

What Are The Implications?

Source: Twitter

The Unsotabbale Finance team, which runs a DeFi wallet on Solana, called the new amendments “a huge setback for the crypto industry”.

Under the new laws, crypto exchanges would have collect, store and verify the personal details of the receiver wallet even though it might not be a direct customer. The process could heighten costs involved in transactions between unhosted wallets and exchanges.

Furthermore, Unsotabbale Finance said that firms with lesser resources may have to reduce their competitiveness by completely avoiding unhosted wallet transactions, which in turn, could affect their European userbase.

Those recovering more than 1$K EUR from unhosted wallet would also be under the radar as crypto providers would be required to report such transactions to the concerned authorities.

The bottom line is was that the new reporting regime could create massive loopholes in personal data information and the same could be exploited by hackers.

Although the proposal is subject to a final vote in April, the same is not expected to see much resistance.