Cryptocurrency exchange Coinbase published a blog post on Monday, raising concerns over new legislation that is set to vote on in the European Parliament this week.
The revised bill, called the Transfer of Funds Regulation, will require crypto exchanges to reveal anonymous transaction details and personal information of users, thereby massively increasing its surveillance of the crypto market.
The bill has targeted “unhosted wallets”, such as MetaMask, calling them wallets not under the regulatory scope of the Financial Action Task Force (FATF). The exchanges would be required to report every transaction over EUR 1000 along with the information of the payee and recipient, regardless of whether the parties are customers of the exchange or not.
“Not only is this verification requirement nearly impossible to do but requiring exchanges to engage in extensive data collection, verification, and retention about non-customers runs against core EU data protection principles of data minimization and proportionality,” Paul Grewal, Chief Legal Officer, said in the blog post.
Patrick Hansen, chief strategy officer for the DeFi project unstoppable Finance, also cautioned about the impact of the new legislation in a Twitter post published Saturday. He noted:
“This proposal cracks down on unhosted wallets & creates huge data honeypots for hackers. It will lead to a system that is very close to SWIFT today, where every crypto transfer (except real P2P) is accompanied by a transfer of personal information.”
7/ But it doesn’t say how exactly a crypto service provider should be able to verify the unhosted counterpart🤨
The consequence of this, imo, is that most crypto companies won’t be able or willing to transact with unhosted wallets anymore in order to stay compliant.
— Patrick Hansen (@paddi_hansen) March 26, 2022
Both industry leaders called upon the crypto community to speak against the draft bill.