EU Parliament Approves Contentious Proposal That Infringes Privacy

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

JUST IN: 🇪🇺 The EU Parliament has approved a proposal for a transfer of funds regulation that affects unhosted #crypto wallets. A final vote is expected to take place in April.

— Watcher.Guru (@WatcherGuru) April 1, 2022

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’.

BREAKING: The ECON & LIBE committees of the EU Parliament voted in favor of the FTR compromises D & E that crack down on “unhosted” wallets.

Entire regulation draft to be voted on later today, but will certainly go through.

Breakdown of the vote & more updates in this thread.

— Patrick Hansen (@paddi_hansen) March 31, 2022

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?

1/ Unfortunately, the EP committees have voted in favor of the TFR passages that crack down on indiv. privacy & wallets.

The amendments are a huge setback for crypto in the EU & should be repealed in the trilogues.

Here are some examples of worrisome real-world consequences 👇 https://t.co/e8yUUkKV2V

— Unstoppable Finance (@UnstoppableDeFi) March 31, 2022

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.

4/ This means before you can send or receive crypto from a self-hosted wallet, Coinbase will be required to collect, store, and verify information on the other party, which is a not our customer, before the transfer is allowed.

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

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.