According to a recent suggestion, firms working with non-custodial crypto wallets should obtain personal information about the wallet's owner.
The European Union is exploring a regulation strategy that would target "unhosted wallets"—wallets that are not held by a third-party intermediary and are also known as non-custodial.
MetaMask, WalletConnect, and hardware wallets like Ledger and Trezor are examples of non-custodial wallets.
The European Commission has suggested a proposal that would require crypto service providers to collect personal data from their clients.
"In the case of a transfer of crypto-assets from or to an unhosted wallet," according to the proposed EU Commission text, "the crypto-asset service provider or other obliged entity should obtain and retain the required originator and beneficiary information from their customer, whether originator or beneficiary."
Furthermore, if the service provider notices that the information given is erroneous, incomplete, or suspicious, it should decide whether to reject or stop the transaction and whether to report it to the relevant financial intelligence unit on a "risk-sensitive basis."
Since the plan first surfaced, the crypto sector has reacted with vigor. The "latest draft" may "seriously violate individual financial freedom, irrevocably impair the cryptoeconomy, [and] impede the future of innovation across the EU," according to Faryar Shirzad, Coinbase's chief policy officer.
The EU Parliament votes on Thursday, March 31 on modifying the Transfer of Funds Regulation. Their latest draft could significantly violate individual financial freedom, irreparably harm the cryptoeconomy, & stifle the future of innovation across the EU.— Faryar Shirzad (@faryarshirzad) March 27, 2022
Former policy analyst at the Dutch central bank Simon Lelieveldt, who currently concentrates on crypto laws, had harsher words for the plan.
He told Decrypt, "If you want to eliminate privacy, this is the greatest way to accomplish it." "There's no way this will hold up over time, but a lot of harm can still be done in 15 years."
On March 31, 2022, the European Parliament will vote on this language.
This idea comes only days after another important European decision on proof-of-work (PoW) blockchain technology.