Europe’s new anti-money laundering (AML) legislation, recently approved by the majority of the EU Parliament’s leadership committee, has triggered concerns over privacy amongst EU crypto users.
The news was shared by EU parliament member Patrick Breyer on X. According to the post, the regulations are set to take effect in three years, but could potentially be implemented sooner.
The post further stated that cash payments exceeding €10,000 or anonymous cash transactions beyond €3,000 will be prohibited. The ban also extends to payments made from self-custody wallets to hosted wallets on crypto service providers, such as crypto exchanges.
Breyer argues that it may affect law-abiding citizens more than curbing criminal activities. Breyer emphasizes the legitimate uses of anonymous payments, such as donations to individuals like Alexei Navalny and organizations like WikiLeaks.
He wrote:
“We have a right to pay and donate online without our personal transactions being recorded. If the EU believes it can regulate virtual currencies at a regional level, it hasn’t understood the global nature of the Internet.”
However, Patrick Hansen, Circle’s Director of Research and Policy, clarifies that media coverage about the ban of self-custody wallets and anonymous transactions in the EU were misreported.
The new AML laws are only applicable to crypto-asset service providers, such as exchanges and brokers regulated under MiCA. However, providers of self-custody wallets, such as MetaMask or Ledger, are not affected.
Furthermore, existing AML rules already prohibit these crypto-asset service providers from providing anonymous accounts, and accounts for privacy coins. Transfers from service providers to self-custody wallets require collection of data, which Hansen argues already exists under the Transfer of Funds Regulation (TFR).
Additionally, peer-to-peer transfers are explicitly excluded from the regulation. However, paying with non-KYC’d self-custody wallets to merchants may become more difficult or banned depending on the merchants’ setup.