Amidst widespread panic within the crypto community over the purported ban on anonymous crypto wallets and self-custodial payments in the European Union, experts have moved swiftly to debunk the misinformation.
Misinterpretation of EU anti-money laundering regulation (AMLR)
The panic ensued following misinterpretations of comments made by Patrick Breyer, a member of the European Parliament, regarding the approval of the new EU Anti Money Laundering Regulation (AMLR) by the economic and monetary policy committee. Reports wrongly claimed that payments to self-custody crypto wallets were now illegal, prompting a flurry of concern among enthusiasts.
However, industry experts were quick to address the overreaction. Freddie New, Head of Policy at Bitcoin Policy UK, emphasized the importance of reading the legislation, clarifying that self-custody remains legal. Similarly, crypto influencer Jordan Fish, also known as Cobie, highlighted that the regulation primarily concerns KYC requirements for hosting wallets for others and does not prohibit self-custody transactions.
Patrick Hansen, Circle’s EU Strategy and Policy Director, played a pivotal role in debunking the erroneous reports. He affirmed that self-custody wallets are not banned, and payments to and from such wallets remain permissible. Hansen clarified that while certain restrictions may apply to transactions with non-KYC’d self-custody wallets; the overarching framework aims to regulate entities susceptible to money laundering and terrorist financing risks.
Impact of AMLR on crypto asset service providers (CASPs)
Hansen elucidated that the AMLR primarily targets Crypto Asset Service Providers (CASPs), obliging them to adhere to standard KYC/AML procedures. Centralized exchanges and custodial wallet providers regulated under Markets in Crypto-Assets legislation (MiCA) must comply with these obligations. However, it’s important to note that MiCA regulations were proposed by the EU to govern digital assets and their markets, coming into effect in June 2023.
While CASPs are subject to stringent regulations, certain exclusions and prohibitions exist within the AMLR. Hardware and software providers, such as Ledger and MetaMask, are explicitly excluded from the regulation as they do not control users’ assets. However, CASPs are prohibited from offering anonymous accounts, a practice already restricted under existing AML rules.
Despite clarifications, concerns linger regarding the impact of the AMLR on non-KYC custodial Bitcoin Lightning wallets like Wallet of Satoshi. Additionally, CASPs will be barred from providing accounts for privacy coins, aligning with existing prohibitions under MiCA regulations.
