Bitcoin , Ether and almost all other cryptocurrency have been doing it rough for the last month after China committed to banning cryptocurrency mining, among other services, in late June. Now crypto enthusiasts have more to fret, as the EU looks to crackdown on the cryptocurrency industry by making digital wallets more traceable.
As part of a larger effort to stymie money laundering and other financial crimes, the EU on Tuesday introduced a legislation package that would require cryptocurrency exchanges and other services providers to collect information from users of their platform. Cryptocurrency wallets are presently completely anonymous, tied only to complicated passwords and no personal information.
The laws will target “crypto-asset service providers” rather than users themselves. It will be incumbent on transfer platforms to acquire the personal information from the sender and receiver, for instance.
“Cryptocurrency is one of the newest ways to launder money,” Mairead McGuinness, the Commissioner for Financial Services, Financial Stability and Capital Markets Union, tweeted on Tuesday. “Our rules will now apply to the whole of the crypto sector. We will ban anonymous crypto wallets and make sure that crypto-asset transfers are traceable.”
Over $2 billion-worth of cryptocurrency was criminally laundered in 2020, according to research firm Chainalysis, with 55% of that money being funnelled through 270 blockchain accounts. The EU’s new laws, if taken up globally, would make such activity much harder. The US Treasury’s Financial Crimes Enforcement Network last year called for similar traceability to be enforced in the US, citing illicit, crypto-based activity from the likes of Lazarus Group.
“Given that virtual assets transfers are subject to similar money-laundering and terrorist-financing risks as wire funds transfers,” the EU Commission wrote, “it therefore appears logical to use the same legislative instrument to address these common issues.”
Cryptocurrency proponents often claim anonymity as one of the system’s great assets, reasoning that privacy is a key part of the decentralised finance that cryptocurrency can offer. However, Bitcoin may be more traceable than previously thought. The FBI in June said it was able to trace and recover 75 Bitcoin, then worth $2.3 million, that Colonial Pipeline paid hackers in the May ransomware attack that corrupted the company’s computer systems and pushed up the price of gas.
Bitcoin hit a high of over $62,000 in April but started dropping precipitously in the middle of May. The price dropped under $30,000 last month when China re-committed to banning cryptocurrency harvesting, which involves power computers solving complex algorithms to “mine” coins like Bitcoin and Ether. The price of Bitcoin flitted between $32,000 and $35,000 in July, but after dipping slightly last week dropped below $30,000 again as the EU announced its planned legislation.
The entire market has been in the dumps, not just Bitcoin. Dogecoin, the memecoin that could, sits at 17c, far below its May high of 72 cents. After nipping above $4,000 in May, Ether is currently sitting at $1776.