The European Union is looking at a regulatory approach to crack down on cryptocurrency’s unhosted wallets. This refers to wallets that are not owned by a third party intermediary, also known as non custodial.
MetaMask and WalletConnect are examples of non-custodial wallets.
The European Commission has suggested text which will require crypto service providers to obtain customer personal information.
“In the event of a transfer crypto-assets to or from a crypto wallet not held or by a third person, known as an “unhosted wallet”, the crypto-asset service provider (or other obliged entity) should obtain and keep the requested originator and beneficiary information from their customers, regardless of originator or beneficiary,” reads the EU Commission proposal.
Furthermore, if the service provider notes that the information is incorrect, incomplete or suspicious, it should evaluate on a “risk sensitive basis” whether to reject, suspend, or report the transaction to the relevant financial Intelligence Unit.
Since the proposal was first made public, the crypto industry has responded vigorously. Faryar Shirzad , Coinbase’s chief strategy officer, tweeted, stating that the “latest draft” could violate individual financial freedom, irreparably damage the cryptoeconomy [and] stunt the future of innovation throughout the EU.”
Simon Lelieveldt (an ex-Policy Analyst at the Dutch Central Bank who now focuses on Crypto Regulations) had harsher words to say about the proposal.
He stated that “if you want privacy to be destroyed, this is the best method to do it.” Decrypt. “This will not hold up over time. However, in 15 years it is possible to do a lot more damage.”
This language will be up for vote by the European Parliament on Thursday, March 31, 2022.
This proposal follows a key European vote on Proof-of-Work (PoW), earlier in the month.
European Union bans Bitcoin mining
EU legislators agreed earlier this month to remove any mention of a PoW mining ban in the Markets in Crypto Assets legislative bundle–a set regulations that consolidates the EU’s approach towards crypto.
Previous versions of the package, which contained what was called a “de facto ban on PoW cryptocurrency miners,” were rejected by the European Parliament’s Committee on Economic and Monetary Affairs.
Original text contained a section requiring these blockchains to meet minimum environmental sustainability standards. This clause was added because of the well-documented effects PoW blockchains have had on the environment.
“We don’t think it’s a good idea. “We hoped to see something in the legislation that would at minimum open the discussion and our discussion about some measures that could address environmental impacts of crypto assets,” an advisor close to negotiations told decrypt.
