Bitcoin and Ethereum, the two most popular cryptocurrencies, both lost ground Thursday morning as European politicians slammed crypto wallets.
The market reacted quickly after European Union legislators endorsed tighter security measures for crypto transactions on Thursday, with the price of Bitcoin plunging more than 4% in the previous day.
On Monday, the benchmark cryptocurrency briefly reached $48,000, representing an astounding 9.3 percent gain from only days earlier.
With its most recent move, Bitcoin has recouped the majority of its gains.
According to CoinMarketCap statistics, Bitcoin hit a daily low of $44,432 in the early hours of Friday before somewhat rebounding to $45,181 at press time.
The majority of other big cryptocurrencies are presently in the red as well, with XRP, Cardano (ADA), Terra (LUNA), and Polkadot (DOT) all losing between 4.5 and 6% of their value.
Ethereum (ETH), the second-largest digital asset by market capitalization, is presently trading at $3,275, according to CoinMarketCap.
Solana (SOL), the only cryptocurrency in the top ten to remain in the green, is up 1.05 percent in the previous 24 hours, trading at $125.34 at press time.
The European Union is cracking down on non-custodial wallets.
The sudden drop might be linked to news of the European Parliament's recent vote to tighten crypto transaction regulation.
Individuals utilizing so-called unhosted or non-custodial crypto wallets will be required to submit personally identifiable information to crypto service providers, such as regulated exchanges, under the accepted plan.
"In the case of a transfer of crypto-assets from or to an unhosted wallet,' 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," according to the EU Commission's proposal text.
Non-custodial wallets do not employ third parties and let users to transact directly with one another. MetaMask and hardware wallets like Ledger and Trezor are examples of non-custodial wallets.
Initially, the Commission suggested that the regulation apply only to transactions valued more than €1,000 ($1,106), but this "de minimis" criterion has been eliminated as part of the cross-party legislative accord, Reuters reported.
The findings have already been criticised by several key individuals in the crypto business, with Coinbase CEO Brian Armstrong claiming that the measure "disproportionately punishes crypto holders and erodes their individual rights in very troubling ways."
The wording is a "recipe for catastrophe," according to Patrick Hansen, head of strategy for Unstoppable Finance, a decentralized finance (DeFi) firm, since "these personal data honeypots will be hacked in no time."
Here is a thread on the negative real-world consequences of these amendments. They are a recipe for disaster.It is not a question of "if" these personal data honeypots will be hacked, but "when". https://t.co/bFxERcq9XJ— Patrick Hansen (@paddi_hansen) March 31, 2022
The Markets in Crypto Assets Regulation (MiCA) legislation package, which attempts to harmonize the EU's regulatory approach to the crypto industry, was passed by the European Parliament's Committee on Economic and Monetary Affairs (ECON) last month.
One of the primary aims of the legislation, according to MPs at the time, is to guarantee "that the EU financial services regulatory framework is innovation-friendly and does not obstruct the adoption of new technology."