The provision prohibiting the use of proof-of-work (PoW) cryptocurrencies was removed from the future EU MiCA directive just a week ago. However, the sector is now facing a new threat. Regulators were targeting private cryptocurrency wallets this time.
The European Parliament’s Committee on Economic and Monetary Affairs will vote on the adoption of the regulatory proposal on anti-money laundering on Thursday, March 31. (AML). Its goal is to amend the current Regulation on Transfers of Funds (TFR) to include cryptocurrency transactions. The project’s sponsors are Ernest Urtasun of the Greens and Assita Kano of the Conservatives and Reformists.
As Unstoppable DeFi’s Patrick Hansen warned, the latest draught regulation would require cryptocurrency service providers not only to collect personal information related to transfers to and from private wallets (which they already must do), but also to “verify the accuracy of information regarding the initiator or beneficiary behind this type of wallet.”
What exactly is the issue?
The problem is that this verification can be difficult, if not impossible, in many cases. Hansen is concerned that cryptocurrency companies will be forced to stop handling private wallets in order to comply with regulations and maintain their position in the EU market.
Even if legislators enacted some guidelines on verification procedures, the potential operational costs of compliance would likely deter smaller players, leading to further market centralization.
The draught also includes a requirement to notify “competent anti-money laundering authorities” of any transfer exceeding €1,000. Furthermore, the European Commission will be required to assess whether “additional measures are required to reduce the risk” within a year of the law’s implementation.
It is unclear what additional measures might be involved. However, as Hansen warned, this could mean anything from a partial ban on the use of private wallets to a complete ban on the use of private wallets.