How would the European Union Crypto Bill impact cryptocurrency investors, companies, and exchanges not only in the EU but in other countries? Would the passage of this bill into law create more legitimacy for the United States and other governments to implement stronger crypto regulations and laws? For those the rest of the world, does this law have an impact on the future of crypto in the United States? Did you know the President of the United States, Joe Biden, recently signed an Executive Order directing several U.S. Federal Agencies to study elements of the cryptocurrency market (you can read more about this Executive Order).
What Would The E.U. Crypto Law Regulate?
Lawmakers of the European Union have voted in support of new laws which aims to strip crypto traders of their anonymity across Europe. On Wednesday, with a 93 votes to 14 votes – and 14 recorded absentees, members of the European Union’s Committee on Economic and Monetary Affairs (ECON) and Committee on Civil Liberties (LIBE) backed the new amendments to the Transfer of Funds Regulations.
While the anonymous nature of the cryptocurrency space has served as an attractive feature to many of its users, it – alongside the volatility of the tokens – is a source of concern to world governments. Some countries have outrightly banned cryptocurrency use; however, others have resorted to regulations, some stricter than others.
During the plenary session, members of the European Union Parliament stated concerns about the probability of the digital asset’s high volatility exerting a negative effect on the current financial stability and its anonymity which aids criminal activities
The new regulations would require crypto exchanges to collect and submit information about the parties involved in every cryptocurrency transaction. “That would make it easier to identify and report suspicious transactions, freeze digital assets, and discourage high-risk transactions” Ernest Urtasu, a Spanish Green Lawmaker, said in favor of the bill
The proposed amendments would mandate the recording of transactions by “un-hosted wallets” with appropriate authorities being notified of any transaction involving greater than €1000.
Key Figures In The Crypto Space Condemns Move By European Union
It is worth noting that after the complete drafting of the bill on Monday, Coinbase, a cryptocurrency exchange platform, had stated fears of the newly proposed amendments -as of then- bringing about an era of strict surveillance that can end innovations within the crypto space.
Following yesterday’s developments, Brian Armstrong, the Coinbase’s CEO via Twitter laid out heavy criticisms on the European Union. “This eviscerates all the E.U.’s work to be a global leader in privacy law and policy. It also disproportionately punishes crypto holders and erodes their individual rights in deeply concerning ways. It’s bad policy.” he said.
Patrick Hansen, Head of Strategy at Unstoppable Finance criticized the policy also stating government institutions will be “personal data honeypots” and targets of cyberattacks.
What Impacts These Bills Would Have On The Blockchain
These amendments are yet to be ratified and assented into law as the European Union Council -made up of the national ministers – is set to deliberate on the bill next week.
As reported by Reuters, the changes to the EU’s Transfer of Funds Regulation first surfaced in a draft last year. If passed, they will compel crypto firms to collect and hand over details of those involved in transfers, including individuals who transact with their customers but may not be users themselves. This is regardless of the size of the transaction.
The EU’s Executive Commission originally floated the idea of demanding information on transfers worth €1,000 ($1,105) or more. However, this fizzled out during the most recent round of negotiations, which have favored stricter measures.
The new regulations, to be discussed further with member states before they’re set in stone, would make it easier for authorities to identify, deal with, and discourage illegal crypto transactions, some lawmakers say. The EU currently has no sweeping laws in place with regards to tracing crypto.
The EU has also agreed it would be a good idea to turn its spotlight on “unhosted wallets” held by individuals — a decision that has gone down about as well as you’d expect. Unhosted wallets, as regulators call them, are simply cryptocurrency addresses not maintained by a third party. Think regular Bitcoin and Ethereum addresses accessible by any non-custodial wallet application, like Bitcoin Core or MetaMask.
In the US, crypto proponents have been fighting similar battles to keep unhosted wallets out of ratified regulations.
Coinbase says EU crypto law peddles ‘bad facts’
The proposal means that crypto businesses such as exchanges would have to collect personal information from anybody transacting with users for more than €1,000 ($1,100).
One of the loudest critics of the new EU crypto tracing measures is US-based exchange Coinbase. In a blog post, published last Monday, Chief Legal Officer Paul Grewal called for traders to “make your voices heard.” Grewal went on to list several perceived inaccuracies in the EU’s proposal, which he labeled “bad facts.”
These include:
- The EU’s statement that digital assets are a primary way criminals hide and move money.
- The idea that law enforcement agencies have no way to track these transfers.
- The claim that the collection and verification of personal data associated with self-hosted wallets is not a violation of privacy.
“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,” wrote Grewal.
Meanwhile, Coinbase chief Brian Armstrong was tweeting his thoughts. “Imagine if the EU required your bank to report you to the authorities every time you paid your rent merely because the transaction was over 1,000 euros,” wrote Armstrong, our emphasis.
However, members of the European Parliament hit back. Dutch Rep. Paul Tang claimed the new measures were just another step to tackling crime and corruption. Responding to EU members from Germany, Markus Ferber’s call to not ban unhosted wallets, Paul Tang claimed that the EU’s approval of the crypto tracing laws was good news.
“Because in today’s vote we will not be banning anything. Instead, we oblige verification to prevent crime and corruption through unhosted wallets,” wrote Tang, our emphasis.
“Crime and corruption aren’t innovation, I’m sure a law-and-order party like the German EPP would agree?”
How Would The E.U. Crypto Law Impact U.S. Investors?
Furthermore, the U.S. is considering tightening regulations. The SEC was questioned about its authority to regulate cryptocurrency exchanges earlier this month by Senator Elizabeth Warren.
Although the U.S. government will watch how European regulations develop, each country’s situation is different. Using cryptocurrency in the U.S. presents a big challenge because it falls under — and sometimes between — several different government agencies. Cryptocurrencies are difficult to categorize exactly as either securities or commodities since some act as securities while others behave as commodities.
Almost certainly, the U.S. will tighten its existing rules on crypto exchanges and crackdown on unlicensed foreign exchanges employed by U.S. residents. However, at the moment, the U.S. is focused on stablecoins.
Jerome Powell, Chairman of the Federal Reserve, and Janet Yellen, Treasury Secretary, have expressed concerns about the lack of oversight in the sector. Cryptocurrencies that track other currencies or commodities are known as stablecoins. To illustrate, Tether (USDT) is pegged to the U.S. dollar, making it the biggest stablecoin. Consumers should be wary that stablecoins operate like unlicensed banks, which may be hazardous to their financial security.
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