The European Union is considering a regulatory approach that will crack down on cryptocurrency’s “unhosted wallets”—wallets that are not held by a third-party intermediary also known as non-custodial.
Examples of a non-custodial wallet include MetaMask, WalletConnect, or hardware wallets like Ledger and Trezor.
The European Commission has proposed text that will oblige crypto service providers to obtain personal information from customers.
“In the case of a transfer of crypto-assets from or to a crypto-asset wallet not held by a third party, known as an ‘unhosted wallet,’ the crypto-asset service provider or other obliged entity should obtain and retain the required originator and beneficiary information from their customer, whether originator or beneficiary,” the proposed EU Commission text reads.
What’s more, should the service provider note that the information provided is inaccurate, incomplete, or suspicious, it should assess on a “risk-sensitive basis” whether to reject or suspend the transaction, and whether to report the transaction to the relevant financial intelligence unit.
The crypto industry has responded in force since the proposal began making the rounds. Coinbase’s chief policy officer Faryar Shirzad tweeted that the “latest draft could significantly violate individual financial freedom, irreparably harm the cryptoeconomy, [and] stifle the future of innovation across the EU.”
The impetus continues to be the incorrect assumption that digital assets are disproportionately used for illicit purposes. When considering the…