The European Union could soon take a closer look at privacy coins and ban them. This could be another bad hit for the crypto space, as the FTX collapse caused massive mistrust in the industry.
A ban on privacy coins may be on the way
The European Union may forbid banks and cryptocurrency service providers from transacting with coins that provide privacy, such as Zcash (ZEC), Monero (XMR), Secret (SCRT), and Dash (DASH). The plans from Czech authorities, who are leading discussions among EU nations on the proposed bill, would be the most recent blow to anonymous payment methods after strict new regulations were agreed upon recently.
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This will prohibit credit institutions, crypto-asset service providers, and other financial institutions from keeping or trading with privacy coins. Although there is and always has been money laundering with cash, governments don’t like the idea of privacy coins and want to introduce anti-money laundering laws.
The information was leaked from an anonymous EU diplomat who told it CoinDesk. The aforementioned well-known cryptocurrencies would be effectively blacklisted if the policy were to become law. It won’t probably be a problem with how the crypto space is falling apart so far this year.
However, some people are willing to fight for the right to use privacy coins, including the CEO of Zcash, Josh Swihart, who said the following:
“If I’m a business accepting cryptocurrency natively, not through a third-party intermediary, I can’t afford to let my competitors see all of that [personal] information,” said Swihart. “Not only the information about my business—what’s coming in and out—but information about my customers who may be transacting with me online or using cryptocurrency. So I expect there to be a tipping point where there’ll be a flood of demand.”
He thinks using privacy coins will become more critical than ever because of the different kinds of crypto surveillance available today. However, it may actually become more challenging than ever if the EU bans them.
According to the Czech proposals, providers of crypto assets would be required to confirm customers’ identities even for sporadic payments under 1,000€ and to inquire about the nature and purpose of the business for larger payments.
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The document also stated that cryptocurrency service providers conducting business outside of the EU would need to confirm that their counterparty is licensed and that they have money laundering controls, with specifics of the vetting to be outlined by AMLA.
To become a law, the proposal must receive support from the Council and the European Parliament. Then authorities would probably also look at other kinds of digital assets, including decentralized finance (DeFi) protocols or non-fungible tokens (NFTs).
The Ethereum-based privacy tool Tornado Cash was subject to sanctions and blacklisted in August by the US Treasury. Similar kinds of regulations are probably coming from the EU as well.