European Union suggests new clampdown on non-custodial crypto wallets

Under a new European Union proposal, companies interacting with non-custodial cryptocurrency wallets will be required to collect personal information about the wallet owner.
European Union suggests clamping down on non-custodial crypto wallets | Coinscreed

The European Union is considering a regulatory approach that will target non-custodial cryptocurrency.

Examples of non-custodial wallets are MetaMask, WalletConnect, or hardware wallets like Ledger and Trezor.

The European Commission has proposed a text that would oblige providers of cryptographic services to collect personal data from customers.

“In the case of a transfer of cryptocurrency to or from a cryptocurrency wallet not maintained by a third party, referred to as a “non-hosted wallet,” the cryptocurrency service provider or other obligated entity must obtain the necessary sender and sender information and keep. Beneficiary of your customer, whether sender or recipient,” reads the text proposed by the European Commission.

In addition, if the service provider considers the information provided to be inaccurate, incomplete, or suspicious, it must assess “on a risk basis” whether to reject or suspend the transaction and report the transaction to the appropriate Financial Intelligence Unit.

The cryptocurrency industry has reacted strongly since the proposal was circulated.

Coinbase Policy Director Faryar Shirzad tweeted that “the latest draft could severely hurt individuals’ financial freedom, irreparably damage the crypto economy and stifle the future of innovation in the EU.”

Simon Lelieveldt, a former policy analyst at the Dutch central bank who now focuses on cryptocurrency regulation, had much harsher words for the proposal.

“If you want to kill privacy, this is the best way to do it,” he said in a report. “There’s no way this can last, but there’s still a lot of damage that can be done 15 years from now.”

The European Parliament will vote in this language on Thursday 31 March 2022.

This proposal follows another major European vote on blockchain proof-of-work (PoW) technology earlier this month.

European Union lifts Bitcoin mining ban

Earlier this month, EU lawmakers agreed to remove any mention of a potential PoW mining ban from the Crypto Assets Markets Legislative Package, a set of regulations designed to solidify the EU’s approach to cryptocurrencies.

The European Parliament’s Committee on Economic and Monetary Affairs rejected previous versions of this package, which included a so-called “de facto” ban on mining PoW cryptocurrencies used by major cryptocurrencies such as Bitcoin and Ethereum.

The text originally included a section that called for these blockchains to “meet minimum standards of environmental sustainability,” a clause included at the back of the well-documented impact of PoW blockchains on the Surroundings.

“We don’t think that’s a good thing. We were hoping to have something in the legislation that would at least open up the debate and our discussion of some measures that could address the environmental impact of crypto assets,” an unnamed close advisor in negotiations told Reuters.