Committees within the European Parliament have voted in favor of new fund transfer regulations regarding non-hosted crypto wallets. The European Parliament’s Committee on Civil Liberties, Justice and Home Affairs (LIBE) and the Committee on Economic and Monetary Affairs (ECON) have voted to approve amendments to its remittances rules that would require crypto exchanges verify the identity of owners of non-hosted wallets they transact with prior to a transaction. The bill is not in the final stages of the legislative process, with a plenary session scheduled for April.
Lawmakers hope to ensure the traceability of transfers between cryptographic service providers and so-called non-hosted wallets in order to be able to better identify possible suspicious transactions and possibly block them.
An unhosted wallet is a term used by the Financial Action Task Force and the US Financial Crimes Enforcement Network, and adopted by other government and regulatory agencies. This means that an individual maintains their own private keys, known in the crypto industry as a “wallet” or “self-hosted wallet”, to distinguish between assets controlled by a financial institution acting as as depositary and an individual.
According to a draft report, requirements to verify whether payer or payee information is accurate should be imposed for crypto transfers above EUR 1,000 (around Rs 84,000). Pending a final vote, the bill could be the subject of trilogues with the European Commission and the European Council from mid-April.
However, while the European Commission and European Council versions of the regulations include an equivalent requirement for crypto service providers to ask users to identify the owners of self-hosted external wallets, they do not require such services – mainly exchanges, that they independently verify the identities of these wallet owners themselves.
The new provisions, while threatening self-hosted wallets, are on track to face significant backlash from the Council and Commission.
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