Furt'Her

“Could I still use my Metamask?” The drama of self-hosted wallets “ban” in the EU

“Could I still use my Metamask?” The drama of self-hosted wallets “ban” in the EU

Written by Iulianna Romanchyshyna 

———–

In light of the recent spread of fake news over crypto media and especially on X (former Twitter) that the EU is banning self-hosted wallets, we decided to provide you with some clarity.

What’s all the fuss about? : The drama in the crypto community took off in response to the publication by the European Parliament of the negotiated text of a new Anti-Money Laundering (AML) Regulation, which many misread as the ban on transactions using self-hosted wallets (like Metamask, Ledger, etc.). Self-hosted wallets are the ones that provide a high level of privacy for users by allowing them not to disclose personal data, one of the main pillars of the crypto narrative. That’s why the community started to break the alarm that the EU is going to war on crypto.

What ACTUALLY happened?: No, self-hosted wallets are not banned and it’s still possible to use them to make transactions with crypto service providers (like the exchanges, custodian wallets, etc.). The new rules apply to crypto service providers and essentially require basic know-your-customer (KYC) rules and ban anonymous accounts (which is already the case under the current rules by the way). These rules will not apply to self-custody wallets that only provide software or hardware as they do not control the wallet itself. However, if you want to make a transaction between a self-custody wallet and a crypto service provider (e.g., an account at the exchange) for more than 1000 euros, the crypto service provider would need to take so-called “mitigating measures” having the owner of a self-custody wallet identified.

It is also important to note another piece of legislation in this context – Transfer of Funds Regulation, which was passed last year and will enter into force by the end of 2024. It already obliges crypto service providers to identify senders and receivers of crypto transactions bigger than 1000 euros. So, essentially, nothing new here!

Important to note that the rules will not have any impact on peer-to-peer transfers between self-custody wallets.

For a broader explanation, see this commentary.

Different commentators have mixed opinions on the EU’s AML measures. Some believe the new laws are necessary to fight crime, while others fear they may still infringe on privacy and restrict economic activity.

When the new rules will enter into force? – The negotiations on the final text of AML Regulation are concluded and, after a formal vote, will be officially published in July 2024. The Regulation will apply three years after the publication – in the year 2027.

Written by Iulianna Romanchyshyna 

Comments are closed.