With a 4% drop in the last 4 hours, Bitcoin appears to be affected by the passage of an anti-privacy law by the European Parliament. The proposal will now go through a plenary session before becoming official. If approved, this could totally change how the market moves money, mainly affecting cryptocurrency exchanges and, consequently, their users. In addition to making the activity of companies more expensive, whose value will be passed on to users, it also ends with their privacy. The vote came two weeks after the same Parliament voted against a ban on mining Bitcoin and other cryptocurrencies using Proof-of-Work. They got it right once, but missed this last opportunity.
Focus on non-custodial wallets
The main focus of the law, passed by the European Parliament, is to end the privacy of cryptocurrency users who use third-party non-custodial wallets. That is, any wallet that the user has its private keys and does not give any information to third parties. Therefore, every time you need to make a deposit on an exchange, you will need to prove that the source address belongs to you, or, to make it even more difficult, someone else. Such a point is highlighted by Coinbase founder Brian Armstrong.
“This means that before you can send or receive cryptocurrency from a self-hosted wallet, Coinbase will need to collect, store and verify information from the other party, which is not our customer, before the transfer is allowed.”
4/ This means before you can send or receive crypto from a self-hosted wallet, Coinbase will be required to collect, store, and verify information on the other party, which is a not our customer, before the transfer is allowed. — Brian Armstrong – barmstrong.eth (@brian_armstrong) March 30, 2022
Following up, Armstrong also states that Coinbase will be required to notify authorities every time you receive €1,000 or more in one of these wallets, even if the transaction is not suspicious. Obviously this only involves Coinbase, but all exchanges that operate in Europe. Going further, such a law can be easily copied by other countries, increasing the operating costs of such companies – which will obviously be passed on to their users. However, the main point is the loss of privacy as governments will be able to create an extensive database to cross-reference information and “name addresses”. Furthermore, it is not difficult to imagine that this data could leak, falling into the hands of other crooks outside the government.
Community had already reacted to address marking
In January of this year, some wallets began implementing solutions that would facilitate identity verification of Bitcoin and other cryptocurrency addresses. However, many abandoned the idea after community feedback on the matter. One of the highlights was the Trezor hardware wallet which quickly abandoned this function. However, if the law is finally passed, cryptocurrency users will not have many options ahead of them, either abandoning their privacy, or abandoning services that present more risks.