The blockchain world is upset over Europe's new strict approach to crypto KYC.
The European Parliament has voted to make all crypto transactions public, effectively making anonymous crypto transactions illegal. The new know-your-customer rules, which would apply to transactions involving unhosted wallets as well, are intended to combat money laundering in Europe.
The vote in the EU reflects a growing concern about the use of cryptocurrency for money laundering and other illegal activities, as well as a push to hold cryptocurrency companies more accountable for the digital assets that pass through their platforms.
In a statement, Ernest Urtasun, co-rapporteur for the EU's Committee on Economic and Monetary Affairs, said, "Illicit flows in crypto assets move largely undetected across Europe and the world, which makes them an ideal instrument for ensuring anonymity." The rules must still be negotiated with EU governments through the EU Council before they take effect following the vote.
The EU vote was quickly denounced by crypto industry leaders as harmful to innovation and counterproductive.
In a statement emailed to Protocol, Cameron Winklevoss, co-founder and president of Gemini, said, "This regulation harms crypto innovation without a commensurate anti-money-laundering benefit."
Coinbase CEO Brian Armstrong denounced the proposal in a tweet shortly before the vote, calling it "anti-innovation, anti-privacy, and anti-law enforcement."
"If you transact with or through a self-hosted wallet, every one of your transactions could be recorded and stored somewhere — and larger transactions will be automatically reported to authorities — even if there is no reason to suspect wrongdoing," the company's chief policy officer, Faryar Shirzad, warned.
The Securities and Exchange Commission (SEC) issued a new recommendation on Thursday, recommending that crypto exchanges record their customers' digital assets as assets and liabilities on their balance sheets. According to the staff accounting bulletin, crypto companies should also disclose the "nature and amount of crypto assets" they hold for customers.
Commissioner Hester Peirce, who has been critical of the SEC's stance on the cryptocurrency market, said the decision highlighted the regulator's "scattershot and inefficient approach to crypto." She claimed that the agency was largely to blame for the regulatory uncertainty surrounding crypto, which prompted the accounting guidance.
Major cryptocurrency firms have recently announced initiatives aimed at improving the industry's KYC and anti-money laundering procedures. Coinbase and Circle unveiled a digital protocol that would allow businesses to verify customers' identities while allowing customers to retain control over their personal data.
Crypto companies also announced the formation of a new industry group that will allow members to comply with the Treasury Department's Travel Rule, which requires that information about who is sending how much and to whom "travel" with the transaction.
By fLEXI tEAM