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Is the age of anonymous crypto trading coming to an end?

Peter Griffin, Contributor. 22 July 2021, 9:18 am
Is the age of anonymous crypto trading coming to an end?

The European Union is proposing a law change for the region that would require companies transferring Bitcoin and other cryptocurrencies to collect the details of sender and recipient.

That would see crypto exchanges and brokers, digital wallet makers and fintech companies building Blockchain-related platforms forced to link transactions to individuals, removing the anonymous nature of cryptocurrencies, which is the heart of its appeal for many.

The EU Commission said that the move was to tackle money laundering and the exchange of cryptocurrency to fund terrorism. 

"Given that virtual assets transfers are subject to similar money-laundering and terrorist-financing risks as wire funds transfers... it therefore appears logical to use the same legislative instrument to address these common issues," the Commission argues.

Prohibiting the provision of anonymous crypto wallets would see person-to-person transfers of cryptocurrency, without an intermediary such as a currency exchange, also recorded. Most crypto brokers and exchanges currently require passport or photo identification on sign-up and impose transfer limits to comply with money laundering laws and to satisfy the banks that they work with.

But the EU Commission wants application of rules across the crypto ecosystem and is seeking to "extend these rules to the entire crypto-sector, obliging all service providers to conduct due diligence on their customers". 

Details that would need to be collected include name, address, date of birth and account number, and the name of the recipient. A transfer limit of €10,000 would also be imposed. Anonymous bank accounts and transfer limits are already in place across the EU's 27 member countries, so the proposal simply applies to crypto what is already in place for cash transactions.

The EU's move, which would have to be passed by the European Parliament, mirrors efforts in the US to gain more transparency into crypto transactions. China has gone even further, cracking down on both bitcoin mining operations in the country and prohibiting financial institutions from facilitating trading of cryptocurrencies - other than its own state-sanctioned cryptocurrency that is.

Blockchain's transparency

New Zealand's largest crypto broker, Easy Crypto, said this week that it had passed $1 billion in sales with more than 1000 percent growth in sales year on year in the past year.

Easy Crypto's co-founder Janine Grainger told me that despite its shadowy reputation, the Blockchain underpinnings of most cryptocurrencies actually made them highly transparent and traceable.

"The key thing for me is that cryptocurrency is so transparent, so visible, so traceable, so auditable, that it doesn't make sense to use it for crime," she said.

"But it's just getting people in the traditional finance sphere to understand that, because there is a real big misnomer out there around how dodgy cryptocurrency is."

Auditable and traceable, but only able to be tried to individuals if identifying details are gathered. That's what crypto companies will increasingly be forced to gather as efforts around the world intensify to regulate cryptocurrency.


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