EU’s Crypto Regulation Would Be a Dire Breach of Privacy

According to reports, the European Union (EU) will vote on anti-money laundering (AML) legislation. If approved, this revised legislation will introduce an array of new rules to deter illicit financial activity from taking place within its borders. Although the proposals may seem rather straightforward, the legislation in question is rather innocuous when protecting individual privacy.

To elaborate, the new “Transfer of Funds Regulation” is designed to impose an entirely new brand of surveillance concerning cryptocurrency trading platforms. As a result, exchanges will be required to share sensitive data related to their customer’s anonymous transactions. In its draft report, EU lawmakers are looking to completely alter how unhosted digital wallets can be utilized by individuals living within the region.

In this regard, unhosted wallets such as MyEtherWallet, MetaMask, which have up until now been able to operate independently, will potentially be forced to adhere to the guidelines put forth by the EU’s Financial Action Task Force (FATF). Not only that, but they will also have to follow the regulatory body’s definition of what a licensed virtual asset service provider (VASP) is.

Hypocritical Much?

The EU touts itself as a leader in individual data privacy and security. Its General Data Protection Regulation (GDPR) is hailed as one of the strictest privacy laws in the world. Although, the aforementioned move goes against the union’s principles.

In fact, over the past decade, the EU has repeatedly fined several major multinationals who have violated its GDPR ruleset. For instance, in its July 2021 earnings report, Amazon, the world’s largest e-commerce retailer, revealed that it paid a mammoth $877 million fine for illegally procuring ‘cookie consent’ from its users. Similarly, the social media messaging app WhatsApp was also hit with a $255 million fine recently for failing to elucidate its data processing practices, resulting in the private information of many customers being misused.

Major Backlash Against the Proposed Law Change Surfaces

As soon as the EU’s aforementioned rule changes came to light, members of the global crypto community came forth to criticize the proposed amendments. For example, Coinbase’s Chief Legal Officer Paul Grewal pointed out that the changes are extremely uninformed, misguided, and have been based on outdated facts and data, adding:

“If adopted, this revision would unleash an entire surveillance regime on exchanges like Coinbase, stifle innovation, and undermine the self-hosted wallets that individuals use to securely protect their digital assets,”

A similar point of view is also shared by DeFi Wallet Unstoppable Finance’s Head of Strategy and Business Development, Patrick Hansen.

1/ I hate to ring the alarm bell again, but the EU Parliament leaves us no choice 🚨🚨

This time it concerns a crackdown on unhosted wallets in the upcoming crypto AML regulation (TFR).

The ECON committee vote is on Thursday and the draft includes some absolute red flags 👇

— Patrick Hansen (@paddi_hansen) March 26, 2022

He noted that for every crypto transaction emanating from an unhosted wallet, over a thousand European companies are obliged to inform AML authorities, even if there is no sign/suspicion of money laundering. “This is an absolute violation of privacy rights,” he opined.