Bitcoin in Europe: Are Cryptocurrencies Threatened with Extinction in the EU?
- 08 Apr 2022
According to the will of the EU Parliament, the rules for crypto transactions are to be tightened. Industry associations and security experts are sounding the alarm. Is this the end of Bitcoin and the rest of the cryptocurrencies in 2022?
The decision was eagerly awaited, and now it has been made - unfortunately to the disadvantage of the crypto industry: the EU Parliament has voted on the so-called Transfer of Funds Regulation (TFR) and the handling of "unhosted wallets".
Now the rules for crypto transactions are to be tightened. Industry associations, hardware wallet manufacturers, Coinbase Pro bot, security experts - they are all sounding the alarm. Are cryptocurrencies threatened with extinction in the EU?
Will Bitcoin be Banned in the EU?
A ban is de facto almost impossible to implement, but experts fear a severe setback for Europe as a whole as a business location.
Specifically, the Transfer of Funds Regulation (TFR) mandates stricter anti-money laundering (AML) measures: Crypto transaction providers are not to be allowed to facilitate crypto transfers from or to non-compliant providers in the future.
According to experts, this is tantamount to a ban on those "unhosted wallets" in Europe. This refers to crypto wallets that cannot be clearly assigned to a person.
In principle, this means all wallets that users manage themselves - including hardware wallets. Accordingly, wallets that are managed by a custodian service provider are excluded.
These include crypto exchanges such as Coinbase or Binance. In the future, these and all other wallet providers are to be obliged to record transaction data at great expense, verify it and forward it to the responsible authorities if the volume exceeds 1,000 euros.
By way of comparison, this is as if banks had to report the account holder to the police every time, they received 1,000 euros. Background: The EU regulation is intended to make it easier to detect illegal transactions and identify responsible persons.
Experts see "Alarming Consequences"
"The changes are a major setback for crypto in the EU and should be repealed in the trialogues," comments the DeFi company "Unstoppable Finance," for example. The consequences, it says, are "alarming."
For example, transactions between "unhosted wallets" and crypto exchanges would become much more costly and time-consuming. Coinbase, for example, would have to collect, store, and verify the personal data of the owner of the recipient wallet - even though he or she is not even their customer.
That's not feasible in practice - which is why it's feared that in the future, companies like crypto exchanges will only allow transfers to non-hosted wallets that are linked to their own customers and can be verified by signing with a private key.
However, this is complicated and expensive. Smaller crypto companies with fewer resources, on the other hand, could even stop transfers to self-hosted wallets altogether - making them less competitive.
Users within Europe may then turn to foreign providers. According to estimates, crypto companies will have until the beginning of 2024 to implement the measures - so the new regulations would not even be relevant before then.
However, analysts warn that this will already result in a gigantic security problem. This is because data collection creates enormous honeypots - large accumulations of personal data that mean hard cash for hackers.
Unstoppable Finance warns, "Rest assured: regardless of security measures, these data pots will be too valuable not to be hacked at some point."
Cybercriminals at an Advantage
The consequences are dire: because the draft regulation links all of a user's data (name, home address, etc.) to blockchain addresses and transaction history, hackers will have detailed information about their financial circumstances.
"Criminals can see exactly how much crypto you have and could launch both virtual (hacking, phishing, etc.) and physical attacks (robbery, kidnapping, etc.)," according to Unstoppable Finance.
Ledger, the company behind the eponymous hardware wallet, also warns that due to the "inherently borderless nature of software and Internet technologies," the proposed new regulation could not deter Europeans from using decentralized technologies.
Rather, it would deny them access to these technologies through trusted and regulated platforms based in the EU - putting them at greater risk.
Bitcoin, in any case, reacted immediately to the news, retreating from nearly $47,000 to $44,660 currently. A drop of 5% within 24 hours. Nevertheless, the tide could turn for the better.
Crypto in the EU: Where Do We Go from Here?
According to experts, the decision can now be appealed if a majority can be found.
After that, the draft would then come up for discussion again in a plenary session and subsequently in the trialogue with the EU Commission and the Council.
"We are all counting on Finance Minister still being able to prevent this nonsense in the trialogue with the EP and the Commission.”
Clearly, the changes coming to Europe from now on will be significant for investors. Luckily, not everything is gray and there are solutions for everything - even for investing with Bitcoin.
In fact, one of the main trends being noticed among professional investors is the use of advanced software to improve their results.
As mentioned above, this software is trading bots - which make trading automatic and secure. Now, we will have to wait and see how the changes in Europe will play out, and whether it will have any impact on technologies such as trading bots.