No Ban on Non-Custodial Crypto Wallets Under EU’s AMLR, Says Patrick Hansen

Industry expert Patrick Hansen has addressed and clarified earlier reports and discussions about the European Union’s cryptocurrency anonymity policy. His analysis aimed to correct common misunderstandings surrounding the regulation’s impact on anonymous cryptocurrency wallets and transactions.

1/ Yesterday was a prime example of why crypto Twitter (and often crypto media) should not be trusted when it comes to crypto policy. Let's debunk claims that the EU is banning anonymous crypto transactions or self-custodial wallets.

Here is what’s actually in the EU Anti Money… pic.twitter.com/dsNZQzl9Mx
— Patrick Hansen (@paddi_hansen) March 24, 2024

Hansen’s discourse revealed the Anti-Money Laundering Regulation (AMLR) as not an attack on cryptocurrency. Instead, it is a framework designed for anti-money laundering (AML) and counter-terrorism financing (CFT) that spans both financial and selected non-financial sectors.

Hansen highlighted that the regulation does not affect non-custodial wallet providers. Its main impact lies with crypto-asset service providers (CASPs), such as exchanges and brokers, especially those regulated under the Markets in Crypto-Assets (MiCA) framework.

These CASPs are required to implement rigorous know-your-customer (KYC) and AML procedures. The regulation effectively prohibits anonymous accounts and transactions within custodial crypto services and extends to barring accounts for privacy-centric cryptocurrencies, which is in line with global AML standards.

However, Hansen critiqued certain aspects of the AMLR but stressed that the regulation mostly reaffirms existing AML/CFT guidelines for CASPs and other regulated entities. He said that the regulation’s impact on the cryptocurrency sector in the EU is “extremely limited,” alleviating fears of a blanket ban on anonymous crypto transactions.

Contrary to earlier reports, Hansen’s analysis stresses that AMLR’s effect on the broader crypto market and practices such as self-custody of wallets and peer-to-peer transfers remains minimal. This clarification comes amidst initial concerns about a potential EU-wide prohibition on the use of non-custodial crypto wallets as part of the AMLR.

Misinterpretations suggested that transactions through anonymous non-custodial wallets were banned. This reportedly followed a decision by the majority of the European Parliament’s leading commission on March 19.

The commission was reported to have taken a unified stance against anonymous transactions. The regulation purportedly bans self-custody wallets that lack proper identification and limits cash transactions to over 10,000 euros and anonymous cryptocurrency payments to above 3,000 euros.

The implementation of this endorsed legislation was scheduled to unfold over the next three years from its formal announcement. It is expected that the timeline could remain the same.