EU crypto regulation does not ban anonymous payments
The recently announced regulation in the European Union appears to ban all anonymous payments with cryptocurrency at first glance, but it actually seeks to expand the bloc’s efforts against money laundering and terrorist financing.
Reports emerged following news of the EU agreement from the Committees of Economic and Monetary Affairs, and Civil Liberties, Justice and Home Affairs, suggesting that anonymous crypto payments would be prohibited in the EU.
Patrick Breyer, a member of the civil libertarian Pirate Party and the European Parliament, strongly opposed the new regulation in a statement.
Breyer noted that the regulation bans anonymous cash payments over €3,000 in commercial transactions and completely prohibits cash payments over €10,000 in business transactions. It also prohibits anonymous payments in cryptocurrencies to hosted wallets operated by providers, regardless of the amount.
However, a closer examination of the incoming legislation reveals that its focus is on crypto asset service providers and crowdfunding platforms, which the EU has been working on for some time.
The 329-page document outlining the regulation details a new instrument as part of a comprehensive package aimed at strengthening the Union’s AML/CFT framework.
Patrick Hansen, a German lawyer and Circle staffer, mentioned in a published tweet that the new regulation does not ban anonymous crypto transactions for self-custodial wallets, but it does impact all crypto exchanges and custodial wallet providers in the EU.
According to section 93 of the regulation, exchanges and wallet providers will be prohibited from offering anonymous accounts, harmonizing with existing AML regulation and MiCA directives from 2019 and 2020.
The regulation does not apply to providers of hardware and software or providers of self-hosted wallets, as long as they do not have access to or control over those wallets.
Changes may include a limit of €10,000 for cash payments for goods and services, with EU member states having the option to set lower limits. Self-hosted wallets can be used freely for transactions, while wallets hosted by providers require customer identification for transactions over €1,000.
While the use of cryptocurrency for illicit activities like money laundering has decreased, blockchain analytics firm Chainalysis suggests that this is likely due to global financial conditions.
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