In fact, there is reason to celebrate. The Bitcoin ban was not tabled again by the EU Parliament this week. A proof-of-work ban as part of the so-called MiCA regulation is thus practically off the table, we reported . Now the next wave of possible bans or at least massive restrictions on DeFi applications and unhosted wallets in the European Union is looming.
The same committee that negotiated the MiCa regulation is now debating the identity disclosure requirements for crypto transactions. The ECON Committee of the EU Parliament is specifically concerned with the Transfer of Funds Regulation, or TRF for short. This is based on the international FATF Travel Rule, which defines standards for combating money laundering.
Red alert for DeFi in the EU
Already next Thursday, March 31st, there will be further votes on the crypto-related anti-money laundering regulation in the ECON committee. The fact that the so-called TRF provides for stricter disclosure requirements for crypto transactions is not new. However, BTC-ECHO now has leaked documents that provide for particularly tough measures. Crypto insiders like DeFi expert Patrick Hansen of Unstoppable Finance are alarmed:
1/ I hate to ring the alarm bell again, but the EU Parliament leaves us no choice 🚨🚨
This time it concerns a crackdown on unhosted wallets in the upcoming crypto AML regulation (TFR).
The ECON committee vote is on Thursday and the draft includes some absolute red flags 👇
— Patrick Hansen (@paddi_hansen) March 26, 2022
Even if some subjunctive moods are included in the working drafts, in an emergency they can lead to the DeFi sector in the EU being severely weakened. Nothing is final yet, but the likelihood of significant cuts in decentralized finance applications is significantly higher than with the averted Bitcoin ban. In contrast to the highly controversial Bitcoin ban, which did not have a majority in the EU Parliament, Commission or Council of Ministers, the drastic measures of the Transfer of Funds Regulation look different. Applications with so-called unhosted wallets could be particularly affected by the regulation.