EU Parliament Approves Tough Rules to Ban Anonymous Crypto Transactions

According to media outlets, European Union lawmakers on Thursday voted in favour of new proposals that seek to outlaw anonymous crypto transactions.

Two parliamentary committees – the EU Committees on Economic and Monetary Affairs (ECON) and Civil Liberties, Justice and Home Affairs (LIBE) – yesterday voted to extend the anti-money laundering requirements that currently apply to traditional fiat payments over EUR 1,000 ($1,115) to the crypto sector.

However, the new rules scrap one of the fundamentals of crypto payments, so payers and recipients of even the smallest cryptocurrency transactions would need to be identified. The legislation also cracks down on transactions with unhosted or self-hosted wallets (wallets whose private keys are held by the funds’ owner, popularly referred to as self-hosted or self-custody wallets). Furthermore, the new rules require cryptocurrency companies to identify the parties involved in transacting cryptocurrency beyond their customers. The measures could see unregulated cryptocurrency exchanges cut off from the conventional financial system.

The proposals are set to proceed to the trialogue stage, which will see the rules debated by the EU parliament, Commission, and Council.

The report shows that more than 90 lawmakers voted in favour of the proposals, a move that various stakeholders have described would invade privacy and stifle innovation.

Major players in the crypto industry have opposed the proposals. Last night, Brian Armstrong, the CEO of Coinbase crypto exchange, expressed his concerns about the new rules ahead of the vote, calling it an anti-law enforcement, anti-innovation, and anti-privacy proposal. The executive warned that the proposal will create a “new crypto surveillance regime” in Europe.

“Any time you receive 1,000 euros or more in crypto from a self-hosted wallet, Coinbase will be required to report you to the authorities. This applies even if there is no indication of suspicious activity,” Armstrong stated, criticizing the rules for treating crypto customers more harshly than fiat users.

Paolo Ardoino, the Chief Technology Officer at Bitfinex digital asset trading platform, echoed Armstrong’s comments, stating that the rules entail heavy security risks and privacy violations.

Combating Financial Crime

The debate about new rules for using cryptocurrencies has been going around for some time. In June last year, the EU Commission proposed that future transactions of crypto assets must be able to be tracked and assigned to individuals as part of efforts to combat money laundering and terrorist financing.

According to KYC guidelines, businesses that provide crypto services would then have to identify users, such as using ID cards.

A new draft for crypto regulation in the EU is currently causing unrest in Brussels (the administrative centre of the European Union). The new draft states that there should be an identification requirement for crypto-asset transactions in all amounts. The EU Committees on Economic and Monetary Affairs (ECON) and on Civil Liberties, Justice, and Home Affairs (LIBE) have spoken out in favor of the complete anonymity of crypto payments.

Image source: Shutterstock


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Janet Yellen Urges Regulators to Move Fast on Regulating Stablecoin Rules

US Treasury Secretary Janet Yellen told regulators that the US government must move quickly to create and adopt a regulatory framework for stablecoins, a rapidly growing asset of digital currencies.

On Monday, July 19, Yellen has met with the President’s Working Group (PWG) members on financial markets and top regulators in the financial industry to discuss how policymakers should move rapidly to ensure that their regulations keep up with rapid technological changes across crypto assets.

The group also discussed the rapid growth of stablecoins, their potential use as a payment method, and potential risks to consumers, national security and the financial system.

The meeting focused on the significance of regulations for stablecoins, which are crypto-assets that peg their values to traditional currencies like the US dollar.

Meanwhile, a group of US regulators plans to make recommendations in the forthcoming months to fix any regulatory gaps around stablecoins, the Treasury Department stated in a statement.

“The Secretary underscored the need to act quickly to ensure there is an appropriate U.S. regulatory framework in place,” the Treasury Department stated.

Yellen’s comments echoed concerns raised by Federal Reserve Chair Jerome Powell, who told policymakers last week at a congressional hearing that stablecoins are growing incredibly fast but pointed to their lack of appropriate regulations as a matter of concern.

“If we’re going to have something (stablecoins) that looks just like a money market fund or a bank deposit or a narrow bank and it’s growing really fast, we really ought to have appropriate regulation,” Powell told the Senate Banking Committee.

Stablecoin Risks

In the past, Christine Lagarde, the president of the European Central Bank (ECB), also talked about concerns over stablecoins. In December 2020, Lagarde stated that stablecoins would be beneficial only if the risks associated with them are mitigated through effective oversight and regulation.

During that time, Lagarde stated that while stablecoin initiatives could overcome shortcomings in cross-border payments, they would benefit only if the associated risks are addressed.

The ECB president stated that should stablecoin initiatives achieve scale and retail consumers treat stablecoins as an alternative to bank deposits, then a potentially huge amount of retail funds could be transferred from the banking system into non-banks.

Last month, the Bank of England (BoE) also stated that stablecoins and any CBDC (central bank digital currency) should be regulated in the same way the banks handle other payments. The BoE stated that it favours adopting regulations, saying that stablecoins must promise consistency and credibility to be fully interchangeable with existing forms of money.   

The three largest stablecoins include Tether, USD Coin, and Binance USD, and their value currently stands at $100 billion, up from about $11 billion a year ago. While service providers responsible for issuing such assets are big players of the traditional capital markets, there are no clear rules on how such assets should be regulated to ensure stability.

Image source: Shutterstock


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Coinbase CEO Says US Treasury May ‘Rush Out’ Rules on Private Crypto Wallets

Coinbase CEO Brian Armstrong is warning crypto asset owners about legislation cracking down on self-hosted crypto wallets that may be hastily introduced in the Trump administration’s final days. Armstrong took to Twitter to alert his 376,000 followers that there are rumblings of a new crypto-targeted legislation in Washington. “Last week we heard rumors that the […]

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