The EU approves a rule that threatens anonymity and cryptocurrency wallets

The European Union has passed a rule that threatens the anonymity of cryptocurrencies and self-custody wallets. The regulation forces banks and cryptocurrency exchanges to collect the identities of the individuals behind large transactions.

The law will require cryptocurrency exchanges, custodial wallets, and other platforms to identify their customers and report suspicious transactions to authorities. In many cases, it could be difficult – if not impossible – for cryptocurrency service providers to verify a non-custodial counterparty.

The cryptocurrency community opposes this because it threatens the anonymity that is fundamental to cryptocurrencies, as well as self-custody.

At the same time, the regulations would extend the anti-money laundering requirements that apply to conventional payments over €1,000 to the cryptocurrency sector.

The problem is that self-custody is a cornerstone of digital asset adoption, and the real risk is that privacy-focused users will simply be forced out of Europe, which would be a setback for the continent in terms of being a place where innovation is welcome.

But many in the cryptocurrency industry oppose the law for additional reasons. They say that it is too broad and does not take into account nuances such as trading for investment purposes or exchanging one cryptocurrency for another.

It is not the first time for the EU

This is not the first time that the European Union has tried to crack down on cryptocurrencies. In 2016, it passed a series of laws allowing national regulators to seize cryptocurrency if they believed it was being used for criminal activity.

As technology advances and digital currencies become more widespread, regulators are inevitably going to feel the need to intervene. It remains to be seen how this will play out in other countries that have adopted cryptocurrency, but it seems likely that the EU will establish a formal regulatory framework in the near future.

Whenever you store your cryptocurrencies on an exchange that supports European users, be aware of your government regulations and exchange rules. We all want digital currencies to gain acceptance, but at the same time, too much regulation can cause chaos in the cryptocurrency market.