The European Union's recent Anti-Money Laundering Regulations (AMLR) have sparked a heated debate about the balance between combating financial crime and preserving citizens' rights to privacy and economic freedom. The new laws, approved by most of the main committees of the European Parliament, have drawn criticism and support from various stakeholders.
Following an article from Feinbold on March 22, Originally titled “Anonymous cryptocurrency wallets are now illegal in the EU,” a wave of questions activity It happened over the weekend on social media. The article used a blog post by Patrick Breyer, a Member of the European Parliament (MEP), as its primary source, and took a scathing view of the new restrictive legislation. The title of the article has since been updated to “EU Bans Anonymous Cryptocurrency Payments to Hosted Wallets” following controversy over whether the focus of the article was overly alarmist.
Why are anonymous crypto wallets thought to be banned?
Breyer's original post highlighted that anonymous cash payments of more than €3,000 in business transactions would be banned under the new regulations, and cash payments of more than €10,000 would be completely banned in business transactions. In addition, anonymous cryptocurrency payments to hosted wallets will be blocked without a minimum.
Breyer, a self-proclaimed digital freedom fighter from the Pirate Party, expressed strong opposition to the new laws in office. He argues that banning anonymous payments will have little impact on crime while depriving innocent citizens of their financial freedom and privacy. Breyer points out that dissidents such as the late Alexei Navalny and his wife and organizations such as WikiLeaks rely on anonymous donations, often in virtual currencies, to fund their activities.
Furthermore, Breyer expresses concern about the possible consequences of the EU's “war on cash.” He warns that creeping demonetization could lead to negative interest rates and increased dependence on banks, ultimately leading to financial disenfranchisement. Instead, it calls for ways to bring the best features of cash into the digital future, allowing citizens to pay and donate online without recording their personal transactions.
Payments to anonymous wallets are blocked from exchanges
However, Patrick Hansen, Director of EU Strategy for Circle, said He sought clarification What he believes is misinformation surrounding AMLR. A former staffer in the European Parliament, Hansen reported regularly on EU legislation before joining Circle and demonstrated a comprehensive understanding of policy. Hansen emphasizes that self-wallets and payments to/from these wallets are not prohibited under the new regulations. P2P transfers are also explicitly excluded from AMLR.
However, Hansen acknowledges that paying crypto merchants with a non-KYC'd (know your customer) self-custodial wallet will become more difficult or prohibited, depending on the merchant's setup. He points out that the AMLR only applies to “obligated entities” and service providers, not providers of hardware, software or self-custodial wallets that cannot access or control crypto assets.
Under AMLR, crypto asset service providers (CASPs) such as exchanges will be required to follow standard KYC/AML procedures, and are prohibited from offering anonymous or privacy coin accounts. Hansen says this is in line with current practices and nothing new in the industry.
For transfers between CASPs and self-custodial wallets, the AMLR imposes “risk mitigation” measures, such as blockchain analytics or collecting additional data about the origin/destination of cryptoassets. This is in line with the Transfer of Funds Regulation (TFR), and the EU's implementation of the Financial Action Task Force (FATF) Travel Rule.
The regulatory debate on self-managed cryptocurrency wallets continues in the European Union
Ultimately, the debate over new anti-money laundering regulations in the European Union highlights the ongoing tension between combating financial crime and preserving citizens' rights to privacy and economic freedom.
While critics like Patrick Breyer see the regulations as a major threat to these rights, others like Patrick Hansen believe that the rules are largely consistent with current practices and that some concerns may be overblown. As the regulations come into force, it will be necessary to monitor their impact on anti-money laundering and the rights of EU citizens.
Obviously, the new regulations are very strict, and there is debate about how requiring KYC for the wallet will stop illicit activity. Criminals illegally sending cryptocurrencies to anonymous wallets may now be breaking two laws instead of one, while ordinary citizens will likely be required to know your customer (KYC) in order to pay for a coffee using a Lightning Wallet.
However, an important fact remains: keeping cryptocurrencies in an anonymous wallet that does not follow a KYC policy will not be illegal in the EU. There would be severe restrictions on what could be done with it without it being defamed. When considering the latest plans for a CBDC, restrictions on money transfers may become more stringent.
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