Goodbye, privacy, goodbye, it was nice while it lasted.

[Poker Player]

After yesterday's vote of the European Parliament committee, I have become very pessimistic:

EU Parliament Passes Privacy-Busting Crypto Rules Despite Industry Criticism.

"Lawmakers are set to end even the smallest anonymous crypto transactions, and plan measures that could see unregulated exchanges cut off."

The law will affect exchanges and non-custodial wallets, such as metamask, ledger and trezor, as I explained.

But it must be said that this is only the first step of a law, which will take some time to be approved and can still be modified, but they have made a bad start:

"The plans must also be agreed on by both the parliament and national ministers, who meet as the EU Council, in order to pass into law."

In line with my pessimism, I came across an even more pessimistic article, Digital currency industry melts down ahead of key EU vote on non-custodial wallets, from which I will quote an excerpt:

(The article was written before the vote took place)

"If the vote goes through, this will radically alter how digital currency transfers work in the EU. It will undoubtedly place huge burdens on unhosted wallet providers, but then again, the EU doesn’t care about that. It only cares about its objectives as a political entity, and it’s notoriously tough on financial crimes, money laundering, and tax evasion. The EU was never going to let Bitcoin and other digital currencies run free, given the way they have been portrayed for the last several years and given the widespread anti-government and anti-law sentiment within the industry.

This was always coming, and it’s going to happen everywhere

Slowly but surely, people are beginning to realize that Bitcoin can not subvert governments and allow people to do whatever they like without consequences. That narrative led to disasters like the Silk Road and extremist anarchists like Cøbra touting Bitcoin as a tool to bring in the sort of chaos they wanted to see in the world. However, Bitcoin isn’t suitable for any of that, and its success entirely depends on being legally compliant.

As we see, powerful governments can use the law to force their will on the industry. We saw in Ottawa how lawmakers could freeze wallets with millions worth of BTC in them with the stroke of a pen. We’re seeing how even the idea that the EU could require unhosted wallets to be linked to identity is causing mass panic across the industry.

What happened to the narrative that Bitcoin could withstand all of this, and governments were rendered powerless when faced with it? This was a lie all along, and big companies like Coinbase, Binance, and others with teams of lawyers and advisors have always known it. They are profit-seeking entities, and they will always comply with whatever regulations they are required to, or they’ll be banned from large markets like the EU, U.S., and others.

Everything is changing before our eyes in the digital currency industry. With bans on anonymous transactions well underway, the U.S. SEC circling the likes of Ripple and Tether, and Satoshi’s Bitcoin slowly being understood as an electronic cash system designed for small casual payments that works within the law and which is always subject to it, things are ever so slowly changing for the better. If the EU votes to pass the new rules, it will be another nail in the coffin for the false narrative plaguing the industry."

And the problem with this is that it sets a precedent and entrenches a trend of increasing state control.

What do you think about it? Are you as pessimistic as me or this article?

Edit: go to page 2 for the key proposals of the draft.

Also: PLEASE REALIZE THAT franky's ARGUMENTS ARE GARBAGE. As they are based on a former draft on a slightly different subject, that didn't pass, as I've shown on page 2.

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[slackovic]

I kinda had a feeling that this vote will go this way that is bad for crypto. I guess there still is a chance this won't happen any time soon because it has to go trough a bunch of other bureaucracy stuff in order to go trough. However, I really do think that unfortunately this is the future for crypto in the EU. Maybe a distant future (because of bureaucracy), but definitely a future.

[pooya87]

The law will affect exchanges and non-custodial wallets, such as metamask, ledger and trezor,

In other words they can only target anything that is centralized.
- MetaMask: is a centralized non-custodial wallet created and controlled by a centralized company in United States called ConsenSys. It also relies on their centralized servers. It is controlled by the company hence can be forced to obey what the authoritarian government demands.
- Ledger, Trezor and all hardware wallet: are centralized non-custodial wallets that are issued by centralized companies and those companies can be forced to even introduce backdoors into their product.

Anything decentralized like bitcoin core, electrum, etc. is not affected.

This was always coming, and it’s going to happen everywhere

This kind of aggressive invasion of privacy and human rights has always been only happening in countries with authoritarian regimes not everywhere.

[Poker Player]

In other words they can only target anything that is centralized.

Although I am gradually acquiring more technical knowledge, I realize more and more that I still have a lot to learn. I didn't know that distinction you make. For me until now there was a distinction (in my mind):

-Custodial wallet: not good for your privacy.
-Non-custodial wallet: good for your privacy.

But I didn't know that difference between decentralized and centralized non-custodial wallets, so thanks for that.

In any case, I believe that very few people will use Bitcoin with maximum privacy.

[ImThour]

The law will affect exchanges and non-custodial wallets, such as metamask, ledger and trezor, as I explained.

So this mean you aren't even allowed to hold your Crypto on a Ledger/Trezor?

[slackovic]

The law will affect exchanges and non-custodial wallets, such as metamask, ledger and trezor, as I explained.

So this mean you aren't even allowed to hold your Crypto on a Ledger/Trezor?

No, it means that if you hold your crypto on a Ledger, Trezor or any other non-custodial wallet, you will have to provide information about a receiver when you are sending your crypto. The same will probably be when holding your crypto on an exchange.

But how will they know who owns each address? There is no mention about mandatory KYC procedure for people who holds crypto on a non-custodial wallets. If there won't be a KYC, how will they know who are the owners? And if they don't know who is the sender, how will they punish him for providing false information about a person they are sending crypto.

[ImThour]

The law will affect exchanges and non-custodial wallets, such as metamask, ledger and trezor, as I explained.

So this mean you aren't even allowed to hold your Crypto on a Ledger/Trezor?

No, it means that if you hold your crypto on a Ledger, Trezor or any other non-custodial wallet, you will have to provide information about a receiver when you are sending your crypto. The same will probably be when holding your crypto on an exchange.

But how will they know who owns each address? There is no mention about mandatory KYC procedure for people who holds crypto on a non-custodial wallets. If there won't be a KYC, how will they know who are the owners? And if they don't know who is the sender, how will they punish him for providing false information about a person they are sending crypto.

Damn, can't we just say we are sending money from one wallet of ours to other? They won't know shit TBH.

[slackovic]

Damn, can't we just say we are sending money from one wallet of ours to other? They won't know shit TBH.

That's exactly what I was thinking. I guess we'll have to wait for the law to go trough all the bureaucracy to see what can and what can't be done.

[hugeblack]

I see that you look at it darkly, but whatever is happening I can consider it good.
We cannot read this vote in isolation from what is happening in Ukraine, and therefore governments are trying to anticipate any news indicating the possibility of transferring Bitcoin to and from Russia.


So new users will be afraid of freezing because they usually use centralized platforms.

 - As for the decentralized platforms, decentralized services, wallets and others will not be affected.
 - Centralized platforms will be severely affected, so our role is to support decentralized platforms.
 - Currencies with low market capacities, altcoins, DeFi, NFTs and others will have the greatest impact because most of the services/wallets are centralized.

[NeuroticFish]

Damn, can't we just say we are sending money from one wallet of ours to other? They won't know shit TBH.

We don't have to tell them anything. At all.
As @pooya87 said, everybody will just switch to the decentralized platforms. We can (and should!) use hardware wallets without their crappy wallet platforms and go on.

The only problem I see is that this will slow down the interconnection between Bitcoin and the financial world.


So it clearly looks bad, but I have high hopes there will be plenty of ways to avoid EU crap when we want to and this may actually make people start using Bitcoin.. more properly.

[Kakmakr]

They will only be able to target centralized organizations that adhere to KYC requirements... you will still be able to use other non-custodial wallets. (Paper Wallets for Cold storage and desktop wallets)  

Bitcoin started out in an era where there was a lot of uncertainty over it's legality in the early days, so the focus was a lot on anonymity ..but things have changed over the years, because Bitcoin has gone mainstream and the regulators have caught up and defined it within the financial world.

The thing that triggered this latest "clamp down" was the Russian sanctions and some people using Crypto currencies to bypass the sanctions. (It is all about control)  

[pooya87]

Although I am gradually acquiring more technical knowledge, I realize more and more that I still have a lot to learn. I didn't know that distinction you make. For me until now there was a distinction (in my mind):

-Custodial wallet: not good for your privacy.
-Non-custodial wallet: good for your privacy.

But I didn't know that difference between decentralized and centralized non-custodial wallets, so thanks for that.

I like to think of privacy and (de)centralization in terms of degrees instead of just being black and white (either centralized or decentralized).
For example the decentralized exchanges we see that rely on a company and have a centralized authority taking a fee from each trade aren't fully decentralized but they can't be called centralized either. I would give it a rate of 8 out of 10 for decentralization.

Same with wallets.
For example we have blockstream's green wallet that has a default 2of2 multi-sig setup where you depend on their servers to spend your money, or to sync your wallet the default server is theirs and nothing else. So it can't be called fully decentralized or fully non-custodial or fully privacy-friendly. If the defaults were used all rates will be 0 out of 10.
Electrum in comparison gives you full control over your keys and you don't rely on a single server but it still doesn't provide full privacy. I'd give it 10 for decentralization, 10 for being non-custodial (9 for their multi-sig) but 5 for privacy (can be improved by running Tor or your own server).

People just have to learn the pros and cons of everything they use.

[ImThour]

Damn, can't we just say we are sending money from one wallet of ours to other? They won't know shit TBH.

We don't have to tell them anything. At all.
As @pooya87 said, everybody will just switch to the decentralized platforms. We can (and should!) use hardware wallets without their crappy wallet platforms and go on.

The only problem I see is that this will slow down the interconnection between Bitcoin and the financial world.


So it clearly looks bad, but I have high hopes there will be plenty of ways to avoid EU crap when we want to and this may actually make people start using Bitcoin.. more properly.

I am already using hardware wallet, what if Trezor is forced to enforce these rules if they want to do business?
A software update from them which ruins our privacy, this ain't difficult if the government really wants it to be.

[NeuroticFish]

I am already using hardware wallet, what if Trezor is forced to enforce these rules if they want to do business?
A software update from them which ruins our privacy, this ain't difficult if the government really wants it to be.

You do have a point here, but I think that they can easily implement (if not done already, I don't have Trezor) in a way that the wallet/accounts part of the suite doesn't interact with the HW if you don't want to, at maintenance/firmware updates. The wallet part will have to comply, but you can use Electrum instead.

And if the hardware wallet makers choose to ruin their credibility and business by being overzealous at asking KYC / reporting, there's always the choice of using proper cold storage (although it may not be great for non-technical people, I know...)

[Slow death]

Anything decentralized like bitcoin core, electrum, etc. is not affected.

At the end of the day, the person will still need to use some centralized service to be able to spend bitcoin.


I'm not particularly surprised by these measures, this was something expected to happen sooner or later, just seeing that they've been asking for KYC for a long time, so what did people expect? did you expect governments to be in favor of anonymity? what would be the point of just requiring KYC on exchanges and leaving other services without any monitoring or control?

[franky1]

the topic creator should not be quoting coinbase articles.. but instead the actual draft paper..

the 3 main things the draft ACTUALLY is concentrating on are these:
payment service providers(exchanges, mixers, custodians, 'professional financial advice services' shopping cart middlemen services)
and
ICO creators

and
stablecoin issuers (e-money tokens)

its not about person to person transactions using decentralised/non custodial/bitcoin wallets. its not about person to merchant/retailers transactions. its not about blockchain transactions.. its not about mining pools or asics or asic farm owners. its not about software developers

its about payment into regulated services like exchanges, its about financial advisers and payment service businesses. its about businesses or people creating new ICO(premine/airdrop/purchase of issued tokens) that want to be listed on exchanges or offer their own swap/exchange/payment/purchase service

as for having to get 'wallets' include KYC. this is not about normal cryptocurrencies or existing cryptocurrencies. its about what they refer to as e-money tokens which translates to stable coins

here is the classification of crypto asset service providers

Crypto-asset service provider authorised for the following crypto-asset services:

Crypto-asset service      Type of crypto-asset services                         Minimum capital requirements
providers
Class 1                         –reception and transmission of orders            EUR50k
                                     on behalf of third parties; and/or
                                   –providing advice on crypto-assets; and/or
                                   –execution of orders on behalf of third
                                     parties; and/or
                                   –placing of crypto-assets.

Class 2                         Crypto-asset service provider authorised        EUR125k
                                   for any crypto-asset services under class 1
                                   and:
                                   –custody and administration of crypto-assets
                                     on behalf of third parties

Class 3                        Crypto-asset service provider authorised for   EUR150k
                                  any crypto-asset services under class 2 and:
                                  –exchange of crypto-assets for fiat currency
                                    that is legal tender;
                                  –exchange of crypto-assets for other
                                    crypto-assets;
                                  –operation of a trading platform for crypto-assets.

as you can see it does NOT mention:
decentralised non-custody wallet developers
nor person-person private transactions
not person to merchant/retailer transactions

a retailer does not need to take KYC info for all transactions. but if its using a payment service to convert to fiat(EG bitpay) then bitpay will require to KYC of both the retailer and the customer

[Poker Player]

the topic creator should not be quoting coinbase articles.. but instead the actual draft paper..

The topic creator isn't quoting coinbase articles. You are right that it is better to go to the current draft paper, but all the news agree on the same thing, and I do not trust your interpretative ability of the draft paper because I know your lenghty arguments interpreting in a peculiar way.

[hosseinimr93]

They will only be able to target centralized organizations that adhere to KYC requirements... you will still be able to use other non-custodial wallets. (Paper Wallets for Cold storage and desktop wallets)

They can also force many of non-custodial wallets to stop their service. Most of non-custodial wallets are connected to centralized servers and can shut down at any time.
For example, trustwallet is a non-custodial wallet. But there is no guarantee that it will work the next time you want to make a transaction.
As stated by pooya87, if you want a wallet which you can be sure that it will always work, you can use bitcoin core. It's open source and no centralized server is involved.

[franky1]

the topic creator should not be quoting coinbase articles.. but instead the actual draft paper..

The topic creator isn't quoting coinbase articles. You are right that it is better to go to the current draft paper, but all the news agree on the same thing, and I do not trust your interpretative ability of the draft paper because I know your lenghty arguments interpreting in a peculiar way.

first of all YOU are the topic creator.. no need to play third person when its obviously me saying YOU should have quoted the draft instead of silly media

also i actually copy and pasted from the draft.. it clearly shows the classifications of what the service providers are

also

After yesterday's vote of the European Parliament committee, I have become very pessimistic:
https://www.coindesk.com/policy/2022/03/31/eu-parliament-votes-on-privacy-busting-crypto-rules-industry-rails-against-proposals/

oh look coindesk.com

when you realise that coindesk is a sister company of coinbase and multiple other businesses and service providers. you have to take their articles into context of their editorial bias towards their sister companies

as for other media.. they just sheep follow and copy and paste the first news releaser and dont do any proper source checking.

also, you quoted coingeek. excuse me but your quoting the calvin ayres/CSW group.. seriously.. GET BETTER SOURCES


so please dont use sources of media/social media.. instead if you want to talk about pessimism of a draft bill QUOTE THE DRAFT BILL

[buwaytress]

Ok so it's clear, this is not about chasing down non-custodials, think even the EU at least would know the futility of cracking down on that (and they're all about open source these days aren't they?).

The thing that surprises me though is the low capital requirement to be a service provider. Little over 1 Bitcoin and you could handle transfers for someone else. I call that ease of doing business, or am I missing out on something?