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EU Plans to Restrict Private Crypto Wallets

Crypto
(Image credit: Shutterstock)

On Tuesday, the European Commission revealed a proposal that would prohibit the use of "anonymous crypto asset wallets" as part of its fight on financial crimes.

The proposal would expand EU anti-money laundering and countering terrorism financing (AML/CFT) rules to the crypto sector, the commission said, because "only certain categories of crypto-asset service providers" are currently subject to them.

"Today's amendments will ensure full traceability of crypto-asset transfers, such as Bitcoin," the European Commission said, "and will allow for prevention and detection of their possible use for money laundering or terrorism financing."

This announcement came shortly after UK police announced the seizure of roughly $408 million worth of cryptocurrency as part of an ongoing money laundering investigation. There are probably similar operations in the EU and other regions.

More information about the changes is available in the latest revision (PDF) of Regulation 2015/847/EU. Many of the changes simply make specific references to crypto assets in the existing regulations without applying further modifications.

There are some notable additions, though, such as requiring "other means ensuring that the transfer of crypto-assets can be individually identified and that the originator and beneficiary address identifiers are recorded on the distributed ledger" for transactions lacking traditional payment account numbers and identifiers.

The revision also said, "the requirements of this Regulation should apply to crypto-asset service providers whenever their transactions [...] involve a traditional wire transfer or a transfer of crypto-assets involving a crypto-asset service provider."

Those requirements include the following:

"The crypto-asset service provider of the originator should ensure that transfers of crypto-assets are accompanied by the name of the originator, the originator’s account number, where such an account exists and is used to process the transaction, and the originator’s address, official personal document number, customer identification number or date and place of birth. In addition, the crypto-asset service provider of the originator should also ensure that transfers of crypto-assets are accompanied by the name of the beneficiary and the beneficiary’s account number, where such an account exists and is used to process the transaction."

Similar requirements were made of the beneficiary's service provider but in the opposite direction. (Meaning those service providers are required to make sure all the relevant information was provided by the originator's service provider.)

The BBC reported that the proposal must be approved by the EU's member states and the European Parliament before it could become law. This process could take up to two years, per the report, which gives people a while to prepare for the changes.

  • daworstplaya
    Would be much better if they just banned Crypto but still this could be the beginning of the end. Fingers crossed.
    Reply
  • spongiemaster
    daworstplaya said:
    Would be much better if they just banned Crypto but still this could be the beginning of the end. Fingers crossed.
    You have to be delusional to think crime is the driving force behind crypto currencies. Bitcoin's market cap alone is over $600 billion US. That's not all child pornographers and Russian hackers. If anything, this move by the EU will help legitimize crypto currencies and make it more appealing to businesses and individual investors. Gov't oversight isn't going to take down crypto, in the long run, it will stabilize it and bring it into the mainstream.
    Reply
  • husker
    I know nothin' about nothin' but common sense is telling me this: Crypto is legal in the U.S. as long as it is not used to avoid taxes. If the government has no way to verify what is in a crypto wallet, then is can (and eventually will) either make crypto illegal or have a way to look at everyone's wallet just like a bank account. Once that happens, then the security of crypto is compromised and there will be backdoor hacks to get at wallets and crypto will become worthless because the trust factor will be gone. I'm open to be educated on this matter if I'm dead wrong.
    Reply
  • TJ Hooker
    husker said:
    I know nothin' about nothin' but common sense is telling me this: Crypto is legal in the U.S. as long as it is not used to avoid taxes. If the government has no way to verify what is in a crypto wallet, then is can (and eventually will) either make crypto illegal or have a way to look at everyone's wallet just like a bank account. Once that happens, then the security of crypto is compromised and there will be backdoor hacks to get at wallets and crypto will become worthless because the trust factor will be gone. I'm open to be educated on this matter if I'm dead wrong.
    To clarify, for most cryptocurrencies the contents of every address (wallet) is publicly viewable, as is the record of where (which address) those contents came from. The issue is determining the real world identity of who the wallet belongs to. For high profile cases, law enforcement can do some investigation to trace the transactions to a point where they can be linked to an individual, but I'm guessing that's costly/time consuming (and there are steps people can take to try to obfuscate their blockchain paper trail). That level of investigation probably doesn't make sense for catching Joe Blow for tax evasion. That being said, many crypto investors probably have a pretty simple transaction history, involving a single address and only transactions from/to an exchange (assuming they didn't just leave it in their exchange account, which many do). In that case, if you have the exchange's records, it'd be pretty easy to identify the owners of addresses (and their gains/losses).
    Reply
  • hotaru.hino
    spongiemaster said:
    You have to be delusional to think crime is the driving force behind crypto currencies. Bitcoin's market cap alone is over $600 billion US. That's not all child pornographers and Russian hackers. If anything, this move by the EU will help legitimize crypto currencies and make it more appealing to businesses and individual investors. Gov't oversight isn't going to take down crypto, in the long run, it will stabilize it and bring it into the mainstream.
    Which to me seems like the opposite goal of what the pioneers of crypto wanted.
    Reply