The EU Is Not Banning Self-Hosted Wallets

Source: https://www.theblockcrypto.com/post/139913/eu-parliament-aml-law-vote-crypto-wallets

The above is the draft of the proposal for a directive that was passed in the EU parliament today. An EU directive is a document that requires EU member states to pass national legislation in accordance with it.

What is says in plain English is that cryptocurrency exchanges must require verification of the identity of the person who controls an address on a blockchain to which a transaction is sent from an exchange.

I don't know how exactly it can be done but I'm guessing that if you're going to send assets from your account on an exchange you've done KYC on to an address whose owner is not known, you are going to have to claim that address as your own.

Since addresses can be generated very quickly and easily, the vast majority of addresses can easily remain anonymous despite this required extra step, which means that this entire thing is basically a big nothing burger.

Now, suppose this type of legislation were extended to individuals. Let's say that it were made illegal to send assets to an address that was not among KYC'd addresses. In that case, a walled garden would be created that included legal exchanges, i.e. ones that enforced KYC, and KYC'd self-hosted addresses. But how about receiving transfers from non-KYC'd addresses? There is no way to stop anyone from sending a transfer from any address. And what about addresses not controlled by any legal person? Such addresses include DAO's or smart contracts in general. How does a piece of software running on chain and with no one owning it do KYC? By the way, Hive has many types of transactions are initiated by the chain itself such as reward or interest payments on HBD in savings accounts.

Of course, the powers that be could go after transaction validators by forcing them to ignore user-initiated transactions where the initiating account or address has not been KYC'd. That could be a problem if the transaction validators were individuals who were known or whose identities were easily discoverable or if jurisdictions where these laws did not apply did not exist.

It will be interesting to see how far the powers that be will go in their effort to control the crypto financial system.