The EU Council has ruled in support of a regulation impacting unhosted cryptocurrency wallets. The legislation is still at the preliminary stage of the parliamentary process and has a general assembly planned in April.
Unhosted Digital Wallets Banned?
Committee members of the parliament for the European Union have decided to endorse its contentious bill on digital currencies, which would establish a variety of privacy-related requirements on wallets not hosted by a third party.
The LIBE and ECON committees voted in support of the legislation on unhosted cryptocurrency wallets, and shortly after, the motion to initiate trilogue discussions was authorized.
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Crypto Wallets Are The Targets
The trilogue meetings will enable members to recommend improvements, although it is uncertain if this will happen. Two particular concessions were voted on, and the results showed a slight margin between those in support and those against it. Unhosted digital wallets refer to monies stored by people without needing an intermediary or third party. This is different from hosted wallets which require a third-party platform to host them.
Crypto Market Plummets
The crypto markets have plummeted substantially after the announcement, with the overall market value falling by over 4.1%. The price of Bitcoin has dropped by about 5% in the previous 24 hours, sliding from $47,668 to $44,247 as of the time of posting. More legislation seems to be on the way as the EU warns of concerns associated with the crypto market.
The proposal of the EU would cause unhosted digital wallets to undergo verification, which will be against the idea of decentralization and anonymity, which the crypto community is known for. Unstoppable Finance described the rule’s impacts in plain words, claiming that it might cause DeFi to become more expensive and complex, “Without an obvious value in the aspect of AML.”
Crypto platform, Coinbase requested the global community to speak out against the legislation, noting that information monitoring will take a different phase. “This would trigger an entire monitoring system on platforms such as Coinbase, restrict creativity, and weaken the self-hosted digital wallets that users use to safeguard their virtual currencies properly,” the firm said in response to the modification.
Although the judgment has not yet been legally recognized, there is little question that it will significantly influence the cryptocurrency market. “Transferring crypto from unhosted digital wallets to European CASPS ought to be feasible reasonably,” says the VP of European legislation, Eva Kaili.
Unanimously, an unfavorable reaction has been received from the cryptocurrency community. The continent of Europe, according to analysts, might lose out on growth and innovation as a result of the strict legislation.
The US Treasury Department is also contemplating enacting laws for unhosted digital wallets. This new rule is identical to the one implemented by the European Union. The cryptocurrency market might be in a difficult period in 2022 in terms of regulation arising from all corners.
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