“Imagine if the EU demanded your bank to report you to authorities every time you paid your rent,” Coinbase CEO Brian Armstrong stated.
The cryptocurrency sector has reacted angrily to an EU Parliament committee voting in favour of a legislative package imposing stricter know-your-customer (KYC) and anti-money laundering (AML) requirements on “unhosted” private wallets.
The new guidelines would compel cryptocurrency service providers — most typically exchanges — to authenticate the identification of anyone interacting with them via an unhosted wallet, and every transaction above 1,000 Euros ($1,100) would have to be reported to authorities.
Coinbase CEO Brian Armstrong expressed his displeasure with the move on Twitter, drawing similarities to fiat currency to demonstrate the ridiculousness of reporting and validating a 1,000 Euro transaction:
“Imagine if the EU obliged your bank to disclose you to authorities whenever you paid your rent over 1,000 euros. Or, if you sent money to your cousin to assist with grocery shopping, the EU required your bank to collect and verify personal information on your relative prior to approving the transfer.”
“How on earth could the bank possibly comply? Banks would retaliate. That is precisely what we are doing at the moment,” he continued.
8/ This eviscerates all of the EU’s work to be a global leader in privacy law and policy. It also disproportionately punishes crypto holders and erodes their individual rights in deeply concerning ways. It's bad policy. Act now here: https://t.co/b3Ll3xXiW4
— Brian Armstrong – barmstrong.eth (@brian_armstrong) March 30, 2022
The idea was included in an amendment to the Transfer of Funds Regulation that was approved on March 31 by the Committee on Economic and Monetary Affairs (ECON) and the Committee on Civil Liberties, Justice, and Home Affairs (LIBE).
To be enacted, the new laws must be passed through trialogue negotiations between the EU Parliament, European Council, and European Commission, and if they pass without opposition, the crypto business will have nine to 18 months to fully comply with the legislation.
Pascal Gaunthier, chairman and CEO of digital wallet company Ledger, was equally blunt, declaring that the “EU Parliament chose fear over freedom”:
“A new rule was just approved that lays the path for a huge surveillance regime to be implemented across Europe’s financial landscape.”
Today, the 🇪🇺 EU Parliament chose fear over freedom.
A new regulation was just voted on that paves the way for a massive surveillance regime over Europe's financial landscape.
— Pascal Gauthier (@_pgauthier) March 31, 2022
The regulatory news appears to have had a substantial influence on Bitcoin’s (BTC) price, with the currency down 4.5 percent in the last 24 hours to $45,243 at the time of writing. Ether (ETH) is also down 3.7 percent in that time period, falling to $3,282.
Unstoppable Finance, a European decentralised finance (DeFi) startup, criticised the news, expressing optimism that suggestions will be rejected during the future negotiations.
“The revisions represent a significant setback for cryptocurrency in the EU and should be removed during the trilogues,” the firm claimed.
Today, the EU Parliament voted in favor of measures that raise significant concerns for both individuals and the crypto ecosystem. If ultimately approved, these new measures will create fundamental issues for privacy, innovation, and access.
Full statement below. pic.twitter.com/kjaeWxftz5
— Crypto Council for Innovation (@crypto_council) March 31, 2022
Patrick Hansen, the head of strategy and business development at Unstoppable Finance, also turned to Twitter to express his outrage, calling the measures a “major disappointment” and a “major threat to human privacy.”
“It imposes implausible wallet verification requirements and unreasonable reporting obligations on crypto enterprises, both of which would have a significant negative impact on EU citizens and businesses.”
He noted that it would be difficult, if not impossible, for crypto service providers to verify a “unhosted” counterparty and cautioned that, in order to remain compliant and avoid jeopardising their legal standing, some businesses may wish to completely discontinue transactions with unhosted wallets. Others, smaller firms, may find the possible operational expenses of compliance prohibitively expensive, leaving it to the larger established players, further consolidating the market.
Hansen also expressed optimism that the restrictions could be weakened during the trialogue negotiations, citing “certain Commission/Council members’ opposition” of the regulations.
Last update on the vote for today: The final committee votes on the entire draft and the mandate to enter trilogue negotiations are in and the results are as clear as expected.
Added these updates to the earlier thread on the vote. https://t.co/7NT6PxdDSB
— Patrick Hansen (@paddi_hansen) March 31, 2022
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.