ECON is The Committee on Economic and Monetary Affairs (ECON) of the European Parliament. The proposal requires crypto-service providers, such as exchanges, to collect and share information about the sender and beneficiary of these asset transfers. This is a practice that payment service providers currently do for wire transfers.

This is meant to ensure traceability of transfers between crypto services providers and unhosted wallets. This is being done to help identify possible suspicious transactions and eventually be able to block suspicious transactions.

“Unhosted Wallets” refers to those wallets with a private key that the individual maintain by themselves as opposed to having a wallet from a custodian cryptocurrency exchange.

Thus, the information about the payee and payer should be tracked in crypto transfers if the value of the transfer exceeds 1,000 Euros.

The purpose of this approach is to close the gaps in the financial systems. These gaps when unattended to gets used for criminal purposes. AML risks are taken seriously; however, this is the equivalent of banning cash, which is disproportionate and unnecessary.

Verification is obliged to prevent to prevent crime and corruption using unhosted wallets. It has also been reinstated that “Crime and Corruption are not Innovation.”

This law will help unleash an entire surveillance regime on exchanges like Coinbase. This can also undermine self-hosted wallets which individuals use to protect digital assets.

Paolo Ardoino: Disappointed to see the proposal on self hosted wallets passed today and hope the final vote on the report will take in to consideration security risks and privacy violations that will transpire if enacted in to law.

Requiring crypto service providers to collect and verify personal data related to self hosted wallets transfers raises major data and privacy concerns, and represents a big step back from human rights.

Hope the ECON Committee will draft a text that would incentivize innovation, transparency as well as consumers protection in the EU.

Community Reaction: KYC will hold entities accountable to the government level if fully enforced. That can bring to light world crimes. Although may be annoying for lack of privacy, it may be necessary to hold those accountable who have complete disregard for human life.

The EU will create one of the biggest honeypots ever, a honeypot that basically puts all digital asset investors at risk of getting shot in the head and robbed. They need to talk with industry players and figure out safe & privacy preserving ways to do this ASAP!

The best scenario would be to not do what they are doing, but I think that ship has sailed. The other risky scenario is them only allowing exchanges to custody digital assets, that’s even more dangerous and creates a SPF that if hacked people will lose Billions!

MEPs know nothing about tech, especially blockchain tech, we need to inform them that there are techs that can help do AML while preserving as best as possible our safety and privacy, maybe things like ZKP.