The European Parliament has approved restrictions on the use of independent cryptocurrencies. What does this mean?
The European Parliament voted this week to introduce new regulatory measures that would make it much more difficult for anonymous cryptocurrency transactions to take place within their respective countries. Members of the EU legislature passed a proposal that would require cryptocurrency companies, exchanges or other firms associated with digital assets to collect personal information about coin users. This is relevant for cryptocurrency enthusiasts whose transactions of more than a thousand euros are associated with wallets not owned by official intermediary companies. Thus, the problem of privacy of users of digital assets has become much more serious. Here are the details of what’s going on.
MEPs want to regulate what happens with so-called non-custodial wallets. This is about software that does not depend on a single authority - as is the case with cryptocurrency exchanges. Its key feature is the need to record a Sidphrase when creating the address. It is what allows you to dispose of cryptocurrencies and call yourself a full owner of them.
What will happen to cryptocurrency wallets?
As a result of the vote, the European Parliament has generally approved the earlier proposals that we wrote about in this article. To formally pass the bill, it must also first undergo tripartite meetings between the EU Parliament, the European Commission and the European Council. However, this process is not expected to prevent a final positive verdict.
According to Decrypt’s sources, the vote follows a debate among politicians and the crypto industry on whether such wallets should be subject to mandatory customer identification (KYC) requirements. KYC is now a mandatory measure for almost any major cryptocurrency exchange.
The EU flag
As a reminder, the aforementioned wallets are not affiliated with official crypto service providers. Examples of such services are MetaMask, WalletConnect or hardware wallets like Ledger. In other words, the measures taken by the European Parliament will affect a huge number of crypto-enthusiasts who were just using third-party wallets to avoid being linked to centralised platforms like exchanges.
Many crypto-enthusiasts have spoken out against the European Parliament’s decision, as not all wallet addresses that fall under the new restriction are associated with individual users. For example, the CEO of US cryptocurrency exchange Coinbase, Brian Armstrong, tweeted that the proposal was “anti-innovation and anti-legislative”. He said it puts the cryptocurrency market in a different environment to conventional currencies.
Imagine if the EU had obliged your bank to report you to the authorities every time you made a payment, just because the amount of the transaction exceeded 1,000 euros.
Coinbase CEO Brian Armstrong
Overall, the measure is really radical and very “unpleasant” to most cryptocurrency users. If before, when working with MetaMask, crypto-enthusiasts did not have to “shine” their data anywhere, now they cannot count on any anonymity at all when sending relatively large amounts of coins. This clearly negates the advantages of crypto compared to conventional money.
Hayden Adams, creator of the decentralised exchange Uniswap, has also criticised what is happening. He shared his outrage on Twitter.
A private key in the Etherium network is a random number that is chosen from 1 to 2^256. And only you know it. You need this unique number to sign a transaction. So blocking non-custodial wallets is essentially a ban on selecting a random number that only you know.
Another bill, this time about stabelcoins, is being prepared in the USA. On the previous day, House of Representatives member Trey Hollingsworth and Senator Bill Hagerty introduced a document designed to make stablcoins secured by a combination of US dollars and “government securities with a maturity of less than 12 months”, i.e. bonds. It would also legally force stablcoin issuers like Circle with USDC and Tether with USDT to publish regular reports on their reserves.
Stablecoins are crypto-assets backed 1:1 to fiat currency, most often to the USD. The idea is that for every Stablecoin in circulation, there is a $1 note or other equivalent asset. If someone wants to redeem that coin, they can get real currency in return.
Tether was previously the subject of a major scandal: the New York Attorney General’s office accused the company of allegedly not fully backing up all the USDT in circulation. And it’s true – some of Tether’s reserves consist of debt, not currency.
USDT
Coinbase collaborator Circle is the second largest issuer of Stablecoin after USDT in terms of market capitalisation – we’re talking USDC. It was criticised last year for the fact that only 61 percent of its holdings were backed by cash or cash equivalents as of July.
We believe the decision by MEPs has deservedly drawn criticism from the cryptocurrency community. Officials have once again shown their fear of decentralised assets, which they are unable to control. Therefore, if the bill is finally passed, it will not be easy to use digital assets in the region. Therefore, the development of blockchain and decentralised finance in the EU will be much slower.
Overall, the bill proposed by US politicians could make it much more difficult for the aforementioned cryptocurrencies to do business. However, the document is still at the draft stage and the exact date of its consideration is still unknown. Stay tuned to our Millionaire Cryptochat to see how the situation develops. There we will talk about other important topics.
Related posts
