On Thursday, EU lawmakers narrowly backed draconian traceability rules for cryptocurrency transfers, in a move that would put users at higher risk of fraud and theft. The law would also require users of “unhosted” wallets to relinquish their privacy by reporting their transactions over €1000 to authorities.
The legislation, which is not yet been made law, passed the committee by a very thin margin for the two important parts of the bill. Compromise D passed with 58 yes, 52 no, and 7 abstentions. Compromise E passed with 62 yes, 51 no, and 5 abstentions.
If passed, this legislation would hurt investors, erode privacy, hinder innovation, and expose users to higher risk of theft and fraud.
It would require crypto businesses to collect and share more data on their customers, making the businesses central points of failure for hackers to attack. This would also increase compliance costs and the overall cost of doing business, hurting smaller crypto businesses the most.
Ernest Urtasun, a Spanish Green Party member and major proponent of the legislation, claimed the legislation would help identify and report “suspicious” transactions, arbitrarily freeze digital assets, and discourage freedom of transacting with unapproved entities.
Patrick Hansen, head of strategy for DeFi start-up Unstoppable Finance tweeted “we have lost a battle, but this is far from over.”
The vote will likely take several months before it is finished, and many lawmakers have voiced opposition to it. It is likely changes will be made to the bill over the coming months.