What EU Crypto Tracing Reforms Mean for Digital Currency Users

By Evan Spicer

Director of Cryptocurrency Investigations

While cryptocurrency is certainly gaining in stature, it is widely seen as functioning in a Wild Wild West environment. Europeans who have wanted to use digital currency, but have hesitated because of the lack of regulation, may breathe easier. The European Parliament has passed legislation that will require the tracing of crypto assets

Fully Traced Crypto Transactions

Although some crypto exchanges have complained about new rules, these regulations were designed to protect consumers who want to buy, sell and trade cryptocurrencies. 

A European Parliament committee voted 93 in favor and 14 against to adopt a rule requiring all crypto transactions to be fully tracked and identified. The reform would give bitcoin transactions a level of transparency similar to that of other money transfers, which usually require identification. 

The first draft of the proposal called for tracking all crypto transactions above a minimum threshold of 1,000, but the final draft eliminated these minimums to increase consumer protection. The change was decided upon because, since transactions can be conducted at a lightning pace, cybercriminals could make numerous small transactions without having to identify themselves. 

The European Parliament also voted to establish a public register for high-risk companies, and MEPs are confident that they will more effectively monitor crypto activity and catch illegal bitcoin transactions, particularly those involved in terrorism, financial fraud, and getting past sanctions. 

Does This Mean an End to Blockchain Privacy? 

The new European legislation is far-reaching, but it does not cover transactions between individuals. However, if people use a crypto exchange for transactions, they will have to identify themselves and report the transfer. 

This news has been unsettling for crypto exchanges, such as Coinbase. Paul Grewal, its chief legal officer, declared, “Bad facts make bad law,” in a Coinbase blog. He points out that cash is still a dominant hiding place for illegal funds.  

Grewal writes, “None of this requires upsetting the privacy expectations of wallet holders because the open architecture underlying digital assets is public and offers unprecedented transparency into transaction details.” 

However, it should be noted that although cash is still often used in money laundering, it is being supplanted by cryptocurrency as more illegal activity is taking place online. 

Second, the fact that the blockchain transactions can already be seen by everyone, it is hard to understand how expectations of privacy are subverted by Europe’s crypto tracing rule. Identification, it seems, would simply take transparency inherent in the blockchain a step further than can increase consumer safety. 

Although some expect other countries outside of Europe to adopt similar regulatory measures, it is reasonable to predict that they may not be as far-reaching, particularly in countries like the United States. Even with reforms, financial cybercrime will likely continue. MyChargeBack experts are the right people to call when you are trying to track down funds lost to a fake broker or a crypto scheme. 

MyChargeBack Will Help You Find Your Funds on the Blockchain

If you have lost money to a cryptocurrency scheme, seek fund recovery assistance right away. Consult with MyChargeBack experts and get started with your fund recovery claim. We have extensive knowledge and working relationships with regulators and more than 450 law enforcement agencies around the world, as well as the solutions that can improve your prospects of getting your cryptocurrency back.