It has not been more than a week since the elimination of a potential prohibition over PoW (Proof-of-Work)-based digital assets from the forthcoming MiCA framework of the European Union, a unique hazard posed to the industry of cryptocurrency could be rising in the EU. At present, the unhosted or non-custodial crypto wallets are in the crosshairs of the watchdogs.
On 31st March, polling will be conducted on the behalf of the European Parliament Committee on Economic and Monetary Affairs on the AML (anti-money laundering) regulatory package pursuing to modify the present TFR (Transfer of Funds Regulation) to enhance the need for financial organizations to provide information regarding the groups transferring crypto assets. Reformists group, Conservatives’ Assita Kano and Greens’ Ernest Urtasun are the regulation’s rapporteurs.
As Patrick Hansen – a crypto advocate from Unstoppable DeFi (a blockchain company) – cautioned, the regulation’s new draft would demand from the providers of the crypto services not just to gather personal information dealing with transactions performed from and to unhosted wallets (because they are in advance ordered that way), however also to validate the precision of the information in line with the beneficiary or the originator at the back of the unhosted wallet.
There is also an issue with the language as it can turn complex and hard to understand in several cases for the providers of crypto services to validate the unhosted recipient. Hence, to have thorough compliance with as well as being secure within the market of the EU, the respective firms would be compelled to eliminate the unhosted wallets as well as the transactions thereof, in the words of Hansen.
Even if some instructions are provided by the legislators to verify the present procedures, the likely functional compliance charges may be troublesome for the smaller players leading to a further concentration of the market. Apart from this, the draft takes into account the obligation to report any of the unhosted wallet-based transactions, having a worth of 1,000 EUR or above, to the proficient AML authorities.
Furthermore, within a year after the implementation of the bill, an evaluation would be required from the EU Commission regarding the other particular measures to be taken to minimize the hazards posed by the respective transactions. It is yet to be seen whether the further measures could be translated into action, however, Hansen cautioned that this could lead to a straight prohibition of the non-custodial wallets.
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