Cryptocurrency Community Wails as EU Approves Harsh KYC Regulation

A new critical cryptocurrency law just passed in the EU, and it went largely unnoticed by the market. While this new law only affects cryptocurrency investors in the EU directly, it could have a ripple effect on the rest of the market.

The new law essentially enforces cryptocurrency companies to mandate strict KYC (Know Your Customer) requirements on all non-custodial wallets. In simpler terms, it means that customers have to reveal the identity of the recipient wallet of the transaction.

Furthermore, crypto trading platforms now have to report every transaction over 1,000 euros to the authorities.

The new law, targeted directly at centralized exchanges, will likely lead to inefficiencies for crypto exchanges and would make onboarding and offboarding assets more expensive.

What Effect Will the EU Law Have On the Cryptocurrency Industry?

Most of the crypto community did not find the latest developments tasteful and has rejected them. Commenting on the issue, Coinbase CEO Brian Armstrong noted that the proposal is “anti-innovation, anti-privacy, and anti-law enforcement.” He argued that this law “treats crypto and every person who holds crypto, differently from fiat.”

Armstrong gave his opinions on why this regulation was negative for the industry, noting: “Imagine if the EU required your bank to report you to the authorities every time you paid your rent, merely because the transaction was over 1,000 euros. Or if you sent money to your cousin to help with groceries, the EU required your bank to collect and verify private information about your cousin before allowing you to send the funds.”

Armstrong argued that such regulation would not fly with traditional banks, arguing that the banks would push back against it.

On the flip side, some crypto community members believe that the new regulatory requirement will be beneficial to the decentralized nature of the industry. Contrary to Armstrong’s argument, they argued that it could drive innovation in the industry.

For example, popular DeFi developer Niklas Benjamin explained that the law is good for the crypto ecosystem, noting that “if you are bullish on decentralization, then I would argue this bill works in your favor.”

However, he admitted that one unintended consequence of the new law is that it complicates operations with centralized exchanges, making user experience and transaction costs worse.

 

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