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European Parliament Approves Ban on Anonymous Cryptocurrency Transactions

European Parliament Committees Endorse Ban on Anonymous Crypto Transactions Under Expanded AML Laws

The European Parliament has taken a decisive step in the realm of cryptocurrency regulation, with the approval of measures aimed at curbing anonymous transactions facilitated through hosted crypto wallets. These actions form part of the European Union’s broadened Anti-Money Laundering (AML) and Counter-Terrorist Financing laws.

The newly endorsed AML legislation, passed on March 19, introduces stringent controls not only on cash transactions but also on anonymous cryptocurrency payments. According to the updated regulations, anonymous cash payments exceeding €3,000 will be prohibited in commercial transactions, while cash payments surpassing €10,000 will be entirely barred in business transactions.

Of particular note is the European Parliament’s prohibition on anonymous crypto transactions, which specifically targets hosted or custodial crypto wallets provided by third-party service providers, notably centralized exchanges.

However, dissenting voices have emerged, including that of MEP Patrick Breyer from the Pirate Party of Germany, one of only two members who opposed the ban. Breyer argues that the legislation jeopardizes economic autonomy and financial privacy. He asserts that the ability to conduct transactions anonymously is a fundamental right and contends that the ban would have minimal impact on crime while effectively curtailing the financial freedoms of innocent citizens.

“With the gradual abolition of cash, negative interest rates and the twisting of money supply at any time threaten card blocking. The dependency on banks is increasing menacingly. Such financial incapacitation must be stopped,” Breyer said (translated by Google from German) in a press release defending his position.

Breyer also voiced apprehensions regarding the potential fallout from the EU’s “war on cash,” highlighting concerns such as negative interest rates and the prospect of banks limiting the money supply. He underscored the importance of preserving the core attributes of cash in the digital era and safeguarding individuals’ rights to conduct online payments and donations without their personal transactions being tracked.

In response to the EU’s regulatory actions, the cryptocurrency community has shown a divergence of opinions. While some argue for the necessity of the new AML laws, others express anxieties about potential privacy infringements and the stifling of economic activities.

Daniel “Loddi” Tröster, host of the Sound Money Bitcoin Podcast, weighs in on the practical challenges and ramifications of the recent legislation. Tröster contends that the legislation poses hurdles and consequences, particularly in its impact on donations and the broader landscape of cryptocurrency utilization within the EU.

“Anyone who would like to donate anonymously can no longer do so with the new regulations. In practice it cannot be prevented, but if the donation recipient operates a hosted wallet, the crypto custodian (which is regulated in the EU) could face restrictions from politicians,” Tröster said (translated by X).

Critics of the ban contend that unlike cash, which offers complete anonymity, cryptocurrency transactions leave a digital trail on the blockchain. Law enforcement agencies have effectively pursued criminals by tracing these transactions, identifying irregular patterns, and pinpointing suspects. Moreover, opponents argue that Virtual Assets have limited significance within the global financial framework, and there exists inadequate evidence regarding the extent and frequency of their exploitation for money laundering purposes.

The implementation of the legislation is anticipated to be completed within three years of its enactment.

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