EU Self-Custody Wallet Ban News: A Misreport, Explained by Circle Policy Officer

Discover the truth behind the sensational news about the EU's ban on self-custody cryptocurrency wallets.

Circle's expert debunks the myths, revealing how AML regulations affect digital currencies and what this means for the future of crypto transactions.

Misreporting of the Ban on Anonymous Transactions via Hosted Wallets

In the cryptocurrency industry, news has been circulating that "the European Parliament has approved a bill to ban anonymous cryptocurrency transactions using self-custody wallets." However, this report has been clarified as a misinterpretation and misreport.

The attention was drawn by a post from Patrick Breyer, a member of the European Parliament, who opposed the bill. Despite his opposition, the bill was approved by a majority vote in one of the European Parliament's main committees, as reported by several media outlets.

Circle's Policy Officer Points Out the Misreporting

The news pertains to measures against money laundering and terrorism financing (AML/CFT) and has been widely shared among major cryptocurrency media and prominent influencers.

Patrick Hansen, the Director of European Strategy and Policy at Circle, known for issuing the stablecoin USDC, has pointed out that these news articles and posts on platforms like X are misreports.

Hansen has provided a detailed explanation of the news, including images of the actual text. Below, we summarize the content explained by Hansen.

AMLR is Not About Cryptocurrency Regulation

The Anti-Money Laundering Regulation (AMLR) is not a cryptocurrency regulation but a broad AML/CFT framework applied to entities called obligated entities (OE).

While all financial institutions, including cryptocurrency service providers (CASP), are considered "OE," non-financial institutions with high money laundering and terrorism financing risks, such as soccer clubs and gambling services, are also treated as OE under AMLR.

Therefore, AMLR applies only to OE/service providers, explicitly excluding obligations for hardware and software providers that do not access/manage crypto assets and self-custody wallet providers.

Cryptocurrency Exchanges and Regulation

AMLR applies to cryptocurrency service providers regulated under the EU's crypto asset regulation law, MiCA, requiring them to comply with general KYC/AML rules.

However, all cryptocurrency exchanges and third-party managed wallet providers in the EU are already subject to these obligations under current regulations, making this aspect not new.

Article 58 of AMLR prohibits "cryptocurrency service providers from offering anonymous accounts," meaning that cryptocurrency businesses holding user assets cannot serve anonymous users.

This prohibition is already in place under existing AML rules and is not new. Cryptocurrency service providers are not allowed to offer anonymous coin accounts, a practice already implemented worldwide, including outside the EU.

Impact on Self-Custody Wallets Almost Non-Existent

If one wants to use a cryptocurrency service provider (CASP) to purchase goods or services with cryptocurrency, the CASP must perform due diligence on the customer, potentially adding KYC/AML measures for transactions exceeding 1,000 euros (Article 15 of AMLR).

These sections are crucial in AMLR for cryptocurrency, but the impact on self-custody wallets and cryptocurrency service providers is very limited, nearly zero.

Misinformation in the Cryptocurrency Industry

Patrick Hansen himself is not a fan of AMLR, opposing lowering standards for cash payments and further restricting exclusions for low-value, low-risk payments. However, he is frustrated with the cryptocurrency media and individuals for spreading news that "completely misleads and stirs public anxiety," not properly conveying the news.

In summary, the Anti-Money Laundering Regulation (AMLR) does not ban "self-custody wallets, self-managed payments, or PEP transactions."

For Those Who Want to Verify the News

The document can be checked for those who wish to verify the content themselves.

This document was agreed upon by the EU Parliament's ECON Committee in March, and only formal approval from the EU Parliament's plenary session (likely at the end of April) and the EU Council is pending. The application will start three years later.

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