No, the EU does not ban crypto wallets | David Z. Morris

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Yesterday, in a series of shocking statements, European Commission regulators said they were banning anonymous cryptocurrency wallets as part of a money laundering crackdown. This naturally brought the crypto markets down, but they quickly recovered, apparently when it became clear that the EU had terribly distorted the substance of the proposed regulation.

The cryptographic provisions (PDF) were part of a set of four proposals intended to combat money laundering. In a thread summarizing the proposed rules, Mairead McGuinness, the European Commissioner for Financial Services, wrote that the measure would ban anonymous crypto wallets and ensure traceability of crypto asset transfers.

This article is taken from The Node, CoinDesk’s daily recap of the most crucial stories in blockchain and crypto news. You can sign up to receive the full newsletter here. David Z. Morris is the chief ideas columnist for CoinDesk.

If it sets your hair on fire, take a deep breath. I’m trying not to use the F word, as this is a family post, but this is one of the few appropriate cases: McGuinness’s statement is outright FUD. Rather than a ban on crypto wallets, EU rules would impose stricter but defensible rules on providers of money services, such as exchanges or custodial services. Either McGuinness and his communications team were mistaken out of sheer ignorance when describing the new rules to the public, or they knowingly clouded public perception.

As The Block’s Tim Copeland pointed out, the new rules would be very similar to the Multinational Financial Action Task Force’s travel rules guidelines. The rules prohibit the provision of anonymous services, such as custody or crypto exchange accounts provided by a third party, and not the provision of self-custody software.

In short, the ban would impact the crypto equivalent of Swiss bank accounts, not the use of crypto as cash. So if you are willing and able to self-guard (which you really should be doing anyway), you can still hold and spend the crypto anonymously (unless you commit a crime, that anonymity will last. probably not long).

Banning anonymous wallets would be a truly terrifying goal, as almost all cryptocurrency wallets are anonymous by default, in the same sense that every web browser is anonymous by default. Wallets like MyCrypto, Exodus, and Electrum are downloadable software around the world. The idea of ​​banning anonymous crypto wallets, in other words, involves a quite draconian crackdown involving raids on server farms hosting wallet code, SWAT teams breaking down the doors of sub-apartments. sol DeFi degens and developers found to have helped people move data.

Unsurprisingly, many news outlets reported McGuinness’s statements without examining them. Some have further distorted the essence of the new rules, like the laughable Irish Times statement that the EU would ban cryptocurrency anonymity, period.

In the face of these gullible headlines, crypto prices briefly faded, with Bitcoin falling below $ 30,000. But the ship recovered quickly and BTC came back above $ 31.5,000 this morning. It could have been for a number of reasons, but it’s safe to guess that the resurgence came when traders realized that the EU was not, in fact, banning anonymous crypto wallets.

It’s a mix that makes it clear that the regulation of cryptocurrency is too often created by people who know next to nothing about technology. (McGuinness also justified the new regulations by relying heavily on the idea that cryptocurrency is a huge new money laundering threat, which is just not true.)

At the same time, it seems unlikely that a high-ranking EU Commissioner, with a team (mostly) of adult professionals, could be wrong about something so fundamental. So here’s the alternate explanation from the realpolitik mob: The EU knows it can’t ban anonymous crypto wallets. But by obscuring the difference between custodial wallets and auto-custody software, they can hope that they can mislead a section of the public into believing that custodial accounts are the only type there is.

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