EU is set to delagalise decentralised mixers

[pawel7777]

Topic says it all, in a not so unexpected move, the European Union pass the vote to ban mixing services and force crypto-business to implement more surveillance on their customers as part of the Anti-Money Laundering Regulation (AMLR).

Link1:
https://www.consilium.europa.eu/en/press/press-releases/2024/01/18/anti-money-laundering-council-and-parliament-strike-deal-on-stricter-rules/
Link2:
https://www.mapsplatis.com/news/crypto-assets/the-european-union-is-set-to-outlaw-decentralised-mixers-and-compel-cryptocurrency-firms-to-closely-monitor-users-dealing-a-significant-blow-to-the-anonymity-offered-by-decentralized-finance-defi/

In short:
- crypto-firms will be compelled to collect more data on users;
- anonymity services tools will be banned.

The legislation also prohibits the use of tools that enable anonymity, including privacy tokens. Additionally, offering crypto-mixing services, which obscure transaction history, will no longer be permitted. Obliged entities are required to verify the identity of users, monitor transactions, and gather more information about both senders and recipients.

For crypto transfers below €1,000, service providers must conduct basic KYC to authenticate their users. However, for transactions exceeding €1,000, customer due diligence measures are necessary, involving longer-term monitoring of user behavior and identity in addition to the standard KYC.

Apparently there was also an initiative to force offline wallet providers (aka non-custodial wallets) to do KYC checks on their users, but that was dropped. I suspect it could've been a tactic when they propose something ridiculous, so when it gets rejected people see it as a win and are no longer angry about all the other restrictions that have been passed.

As far as I understand all this, offering mixing services will be illegal, but using such services will not be outlawed.

[mindrust]

As far as I understand all this, offering mixing services will be illegal, but using such services will not be outlawed.

Using them is not outlawed because they can take down any service they want whenever they want. They want to see who is crazy enough to take that risk. They probably think, if this person desperately wants to mix his coins, he probably has something to hide, let’s check. Another thing is, they probably seize these mixing services way before they announce their involvement… just to collect more data. Using centralized mixing services never made any sense to me because of that.

Decentralized services will be available anyway. Not every dev lives in a country they can reach. Can they get to a dev that lives in Russia for example? I don’t think so but this time your data will be in the hands of Putin.

[pawel7777]

(...) Using centralized mixing services never made any sense to me because of that.

Could be, but I don't recall ever hearing about anyone being prosecuted based on evidence from government controlled mixing services.

Decentralized services will be available anyway. Not every dev lives in a country they can reach. Can they get to a dev that lives in Russia for example? I don’t think so but this time your data will be in the hands of Putin.

Sure, but now any potential developers will have to take special measures to remain anonymous when working on any decentralised exchange, mixer of any sort or coin/token with anonymity feature. Even if they're not based in EU, the thought that you might get arrested anytime that you set foot in any of the EU countries is not going to be pleasant. And most people appreciate the option of traveling freely and would not be happy to give that away.
And from users' perspective, there's a risk of coins suspected to be mixed to be red-flagged by crypto-businesses, depending of how deep of a surveillance they'll be expected to do.

[mindrust]

Sure, but now any potential developers will have to take special measures to remain anonymous when working on any decentralised exchange, mixer of any sort or coin/token with anonymity feature. Even if they're not based in EU, the thought that you might get arrested anytime that you set foot in any of the EU countries is not going to be pleasant. And most people appreciate the option of traveling freely and would not be happy to give that away.
And from users' perspective, there's a risk of coins suspected to be mixed to be red-flagged by crypto-businesses, depending of how deep of a surveillance they'll be expected to do.

I don't think you can truly stay anonymous on the internet for a very long time if you are working on a project. Tbh, I don't believe satoshi is anonymous too. To us, yes he is still anonymous, but just because we don't know it, yet, doesn't mean somebody somewhere also doesn't. Let's say the US gov really knows who satoshi is, is it in their interest to share that info with the general public? Don't think so. They are not stupid.

The important trick is, to not alert the gov with your actions. If the government wants to know who you are, they will know it eventually. Keeping the low profile is more effective than trying to get the best privacy measures. When you are using the infrastructure they own, having privacy is almost a futile attempt.

[btcinfo891]

As far as I understand all this, offering mixing services will be illegal, but using such services will not be outlawed.

Using them is not outlawed because they can take down any service they want whenever they want. They want to see who is crazy enough to take that risk. They probably think, if this person desperately wants to mix his coins, he probably has something to hide, let’s check. Another thing is, they probably seize these mixing services way before they announce their involvement… just to collect more data. Using centralized mixing services never made any sense to me because of that.

Decentralized services will be available anyway. Not every dev lives in a country they can reach. Can they get to a dev that lives in Russia for example? I don’t think so but this time your data will be in the hands of Putin.

In the case of a decentralized service based on opensource code, the location of the developer(s) does not affect the security of the users' data in any way, because source code is freely available and anyone can inspect it and make sure that there are no backdoors.

[bbc.reporter]

As far as I understand all this, offering mixing services will be illegal, but using such services will not be outlawed.

Using them is not outlawed because they can take down any service they want whenever they want. They want to see who is crazy enough to take that risk. They probably think, if this person desperately wants to mix his coins, he probably has something to hide, let’s check. Another thing is, they probably seize these mixing services way before they announce their involvement… just to collect more data. Using centralized mixing services never made any sense to me because of that.

Decentralized services will be available anyway. Not every dev lives in a country they can reach. Can they get to a dev that lives in Russia for example? I don’t think so but this time your data will be in the hands of Putin.

This however weakens the fungibility of bitcoin. The owners the coins that do not listen and mix their coins, they're coins might not be accepted by businesses, exchanges in the cryptospace and those marked coins might have lower value in the market. Will everyone want to keep marked coins in their wallets? Innocent or guilty, this will only give the government a reason to find a crime in your activities in the cryptospace. Another head shaking problem people who want to use bitcoin as a medium of exchange.

[d5000]

The AML directive is nothing new and was already discussed intensely here.

- anonymity services tools will be banned.

"Tools", i.e. software, are not banned. But if the directive is accepted, is that EU centralized crypto asset service providers (CASPs) cannot offer anonymity tools. Basically, the AML directive treats CASPs like any other banks or fintechs with some few exceptions (like providers of gift/prepaid cards with low amounts, which don't have to abide to the AML directive).

I have read the original formulation and for me it is even unclear if "privacy coin" accounts would be banned completely, because while they mention privacy-enhancing coins, the scope is on accounts facilatiting the anonymization of funds or transactions, including "through" privacy-enhancing coins. This could mean for example that an exchange perhaps could offer a Monero account but only if it does full KYC and perhaps investigates the origin of the funds on each transaction.

Apparently there was also an initiative to force offline wallet providers (aka non-custodial wallets) to do KYC checks on their users, but that was dropped.

No, it wasn't the offline wallet providers who would have had to do these checks, but CASPs (like exchanges, centralized wallets etc.). They would have to be forced to check any transaction incoming from a self-hosted wallet. Probably like some exchange in the Netherlands 1-2 years ago which had required its customers depositing funds from self-hosted wallets, to confirm that the origin wallet was controlled by them; or in other cases, indicate the person who sent the funds.

As far as I understand all this, offering mixing services will be illegal, but using such services will not be outlawed.

Somewhat true ... CASPs in the EU won't be able to offer mixing services.

However, it's likely that something like Samourai would not be a CASP under this directive, where CASPs are entities in general which control funds, realize transactions on behalf of customers, or give financial advice. If Samourai only provided a server to receive messages from potential CoinJoin participants, but did not sign these transactions, then it wasn't in control of the funds and also didn't "realize" the transactions.

[avikz]

Well, not surprising at all! The way US government have started cracking down on crypto related services, it was just a matter of time before rest of the governments follow the same path. So EU has joined the bandwagon to start their surveillance on the internet because they consider mixing services illegal. The way various governments are moving, I don't think crypto users will be able to stay anonymous anymore. That itself will defeat the whole purpose of cryptocurrency.

In coming years. cryptocurrency will remain as an investment and that majority of the supply will be controlled by the corporates and government bodies. Those days are not far, sadly!

[zasad@]

Decentralized services will be available anyway. Not every dev lives in a country they can reach. Can they get to a dev that lives in Russia for example? I don’t think so but this time your data will be in the hands of Putin.

If someone uses a centralized service, then they cannot trust this service 100% because they cannot verify that transaction data has been deleted. And for the developer this is a big plus for cooperation with the judicial system if he is later caught.

If we consider a decentralized service and a Russian developer, then Russian citizen Alexey Pertsev was charged with developing the Tornado Cash cryptomixer. Its code is open and anyone can check it and use it.
And what kind of data might end up in the hands of the Russian president after this, if all this data is open to everyone on the blockchain?
You can only see that address 1 sent 1 Ethereum to the mixer, and address 2 took 1 Ethereum from the mixer, but you cannot find an obvious connection between the addresses when many people use this service.

[Poker Player]

The AML directive is nothing new and was already discussed intensely here.
...
... CASPs in the EU won't be able to offer mixing services.

However, it's likely that something like Samourai would not be a CASP under this directive, where CASPs are entities in general which control funds, realize transactions on behalf of customers, or give financial advice. If Samourai only provided a server to receive messages from potential CoinJoin participants, but did not sign these transactions, then it wasn't in control of the funds and also didn't "realize" the transactions.

Anyway, as things stand, I think these are the first steps. The next ones will be to ban all kinds of services that offer privacy, be they mixers, coinjoin services or whatever. The defense of privacy has always been stronger in Anglo-Saxon countries. Nobody in the EU is going to protest strongly about this. In the same way that cash payment limits will continue to fall and even if they do not fall, it does not matter because inflation will do its job. This is in line with the launch of CBDCs.

[Helena Yu]

Oh shit, even below €1,000 transfer need to conduct KYC, who had submitted KYC to campaign managers?

We should expect theymos will tightening the rules in this forum too, but I hope I'm wrong.

2025 will be different since many thing happens in this year e.g. taxing for miners, war on few countries, elections, and ban on privacy coins.

[Husires]

Does it apply to all transactions or the €10,000 per month that the services currently charge? It would be annoying to provide your data every time you want to spend Bitcoin or use CEX to carry out financial transactions.
Verifying identity in this way will lead to more use of the dark web to buy more Monero. It cannot allow the use of a VPN and wants users to disclose all financial transfers. Cash has a greater degree of anonymity.

[mindrust]

Decentralized services will be available anyway. Not every dev lives in a country they can reach. Can they get to a dev that lives in Russia for example? I don’t think so but this time your data will be in the hands of Putin.

And what kind of data might end up in the hands of the Russian president after this, if all this data is open to everyone on the blockchain?

Now reading my post again, I think I wanted to say "the dev's data" probably. The dev's privacy is as important as ours from now on (actually more important). If the dev does his job in a country where the US can send their gestapo, he will get caught by them. If he does his job in Russia, the Russian mob will be after him.

We have already seen it with McAfee's case. He was in Spain and they caught him for a crime he is not responsible to Spain.

Oh shit, even below €1,000 transfer need to conduct KYC, who had submitted KYC to campaign managers?

KYC on sig camps would be the last nail on this forum's coffin. Why would you even say such stuff? Now I know it can happen. (probably sooner than we think)

[d5000]

Oh shit, even below €1,000 transfer need to conduct KYC, who had submitted KYC to campaign managers?

I think you meant it as a joke, but as people often take jokes seriously, I'll comment on it.

First I link to the approved text here so everybody can look into it, because articles in crypto media often simplify and you can get the wrong impressions:

>>> AML Directive approved text <<<

The new "Obliged subjects", i.e. those who have to conduct KYC, are "crypto-assets service providers". This category of service providers is defined in the MiCa regulation (Link to MiCa). In general, those obliged to realize KYC are (centralized) exchanges, wallets and other "custody" services, trading services, and financial advisors. Neither forums nor signature campaign management should fall into this directive, these are simply entities paying for services.

2025 will be different since many thing happens in this year e.g. taxing for miners, war on few countries, elections, and ban on privacy coins.

This EU AML directive reform will come into force in 2027.

Does it apply to all transactions or the €10,000 per month that the services currently charge?

I think here you confused two numbers. The 10.000 € are a hard limit for (single) cash payments, and from 3.000 € on KYC has to be conducted on them. In addition, there is some due diligence which has to be done by obliged subjects if they detect a non-cash transaction of 10.000 € or more (or several linked transactions, i.e. if somebody sends two times 9999 euros the same day or one day later to the same bank account).

Crypto service providers like those I mentioned in the EU will be instead forced to implement KYC regardless of the amounts operated, from 2027 on. But that is already partly the case, at least in most countries, because countries have their own regulations in place and many are already regulating these services.

PS: This does not mean I endorse this directive. I think it is a dangerous one, and I think Bitcoiners should fight in their countries that such legislation is not introduced.

[Text]

This seems like a step backward for crypto anonymity. Yeah, we know that the intention behind these regulations is to prevent illicit activities so legitimate users will have to give up some of their privacy rights and could lead to a chilling effect on the use of cryptocurrencies for legitimate purposes.

Developers in other parts of the world where these regulations do not apply can continue to work on these projects and decentralized services, by their very nature, are resistant to censorship and regulation.

[nelson4lov]

In short:
- crypto-firms will be compelled to collect more data on users;
- anonymity services tools will be banned.

What's the point of having Decentralized finance if our data will need to be collected and submitted to the government? It makes zero sense to me because if that becomes the status quo, then they'd be no point opting for a DEX instead of just going straight to a CEX because at least it's clear that using them will require KYC from the onset.

Slowly, any and all forms of privacy and anonymity tools are being stripped down from crypto. What's next for us? Zero knowledge. I'm sure they'd come for it too.

[Poker Player]

You seem to be the one who understands the legislation best, d5000.

This EU AML directive reform will come into force in 2027.

Hopefully it will take a little longer. It would not be the first time that a moratorium is put in place because of how slow and inefficient the administration is, or even that legislation enters into force but in practice takes longer to implement.

I think here you confused two numbers. The 10.000 € are a hard limit for (single) cash payments, and from 3.000 € on KYC has to be conducted on them. In addition, there is some due diligence which has to be done by obliged subjects if they detect a non-cash transaction of 10.000 € or more (or several linked transactions, i.e. if somebody sends two times 9999 euros the same day or one day later to the same bank account).

Well, for nuance that is the upper limit for the whole EU. In Greece the cash limit payment is 500 euros (lol), in France and Spain it is 1,000, while in Belgium and Portugal it is 3,000.

With this, I am not so much concerned about the immediate future but where we are headed.

[zasad@]

Decentralized services will be available anyway. Not every dev lives in a country they can reach. Can they get to a dev that lives in Russia for example? I don’t think so but this time your data will be in the hands of Putin.

And what kind of data might end up in the hands of the Russian president after this, if all this data is open to everyone on the blockchain?

Now reading my post again, I think I wanted to say "the dev's data" probably. The dev's privacy is as important as ours from now on (actually more important). If the dev does his job in a country where the US can send their gestapo, he will get caught by them. If he does his job in Russia, the Russian mob will be after him.

We have already seen it with McAfee's case. He was in Spain and they caught him for a crime he is not responsible to Spain.

In fact, many countries have central banks that are subject to the Bank for International Settlements and its requirements first, and only then to the laws of their country.
And the requirements for all countries are the same: that all transactions have a verified sender and recipient if a certain limit is reached.
Therefore, the trial of the developer Pertsev will be very revealing.

[Synchronice]

What they do is really ridiculous. I mean, they don't regulate crypto exchanges, CEXs are registered wherever they want, in offshores, on islands where god knows what happens. They let these exchanges to run exchanging business very easily and also give them every rights, i.e. they can legally ask us for KYC documents, for bill documents, for money source/income documents, etc. But you know what? No one cares about our sensitive documents. When EU banks decentralized mixers and non-kyc services, they should take the responsibility and create a system where those CEXs should be registered and monitored by the governments to protect our sensitive information.
It makes me crazy such a dumb and inattentive people work in EU parliament.

[d5000]

No one cares about our sensitive documents. When EU banks decentralized mixers and non-kyc services, they should take the responsibility and create a system where those CEXs should be registered and monitored by the governments to protect our sensitive information.

First, decentralized mixers and non-KYC services are not subject of the AML directive! There is not a single source the OP can provide which backs the thread title. If OP has any dignity he should simply change the title to "set to delegalise centralized mixers".

Second, there are strict data protection laws in force -- the famous GDPR. Every website or service provider who serves European customers has to protect the personal data of its customers, including of course crypto services.

I don't know if you mean that the EU should provide a verification service itself, but I don't think that's a good idea. A lot of state offices were hacked in the past, and if we have a big centralized EU "personal data" silo, this would of course be an extremely interesting target for blackhat hackers.

I repeat that I don't like the AML directive because for me, even centralized mixers should be allowed in my opinion because everybody should have the right to privacy and blockchains are public. But the problem is that all/most governments are trying to comply with the FATF rules to avoid being put on a black or grey list. And FATF rules - which are not laws but guidelines - currently treat every crypto custodial service like a bank or fintech. Even if they forget that to "launder" money with crypto, crypto-crypto services like mixers are a minor problem - the big issue are the techniques to get "clean" fiat.

In an ideal world, the crypto community should propose rules to FATF which don't criminalize privacy services but allow effective measures to stop thieves, blackhat hackers and terrorists. But for that to happen, the crypto community must get much stronger.