The whole legislation is in the framework of the fight against money laundering. More specifically, financial institutions will be required, among other things, to require originators of transactions to verify the identity of the recipient of each transaction. This is even if it is a private wallet.
Thus, providers of cryptocurrency services, i.e. exchanges and other entities operating in the cryptocurrency sector, must share personal information about their clients during transactions. This move is described by some as choosing fear over freedom.
There is still hope for cryptocurrencies
The European Parliament approved the new legislation, although the vote in favor was very close. The whole proposal has been given the mandate to be discussed in trialogues between the European Commission, the European Council and the European Parliament. In other words, today’s approval of this proposal is bad news for cryptocurrency privacy in the European Union, but that doesn’t mean it can’t go through modifications.
Trialogues normally last several months and provide the last chance for adjustments. Some of the individual views of the members of the boards and commissions have been positive for the cryptocurrency world and so change can still be achieved. However, the situation is much more complicated than the Proof of Work cryptocurrency ban vote.
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Cryptocurrencies are largely based on a kind of decentralization and anonymity. With the introduction of the need to use KYC identity verification on most exchanges, the bigger part of the idea of anonymity has gone away. Now, with this move, the level of anonymity would be diminished again, and it’s possible that this move would scare off a lot of investors.