The EU's new regulations on encryption assets spark heated debate: Will anonymous transactions become history?

In mid-January 2024, the European Union proposed stricter restrictions on cryptocurrency transfers and private wallets in the anti-money laundering regulatory framework. On March 23, the European Parliament and Council officially issued the latest anti-money laundering "opening box order", attracting widespread attention from the industry.

Core Content of New Regulations

The new regulation known as "Box Opening Order" aims to eliminate the anonymity of cryptocurrency transactions in order to regulate money laundering and behaviors such as tax evasion and avoiding regulatory asset transfers using encryption assets. The main provisions include:

1. Within the jurisdiction of the EU, the use of self-custodial encryption wallets with unidentified identities for any scale of payment is prohibited.

2. Cryptocurrency companies need to conduct due diligence on transactions over 1000 euros.

These regulations mainly target cryptocurrency users and cryptocurrency service providers ( VASP ).

New Regulation Impact Analysis

"Box Opening Order" has sparked intense discussions on both the pros and cons:

positive impact

• In conjunction with the previous MiCA legislation and TFR rules, it helps regulate cryptocurrency-related criminal activities.
• Prepare for potential future taxation policies on encryption assets.
• Compared to a complete ban, more "flexible" regulatory measures have been implemented.

potential issues

• Directly eliminates the anonymity, which is a core feature of encryption currency.
• May undermine the financial ecosystem built on decentralized technology.
• Restricted users' rights to freely dispose of their assets.
• May lead to the spread of traditional centralized regulatory power to the encryption asset community.

Industry experts believe that this regulation may struggle to find an appropriate balance between fostering financial innovation and maintaining order. It may drive some users to turn to other unregulated encryption assets, while VASPs will face the dual pressure of heavy KYC obligations and user attrition.

Impact on Other Encryption Assets

Currently, the "Open Box Order" primarily targets cryptocurrency trading and has not yet covered other crypto assets such as NFTs, DeFi, and GameFi. This may be due to the following considerations:

1. The market size of other encryption assets is relatively small and is not yet sufficient to become a major tool for crime.

2. The European Union maintains a cautious attitude towards the regulation of encryption assets, unwilling to prematurely subject emerging technologies to strict controls.

This also means that participants in the Web3 industry have the opportunity to establish effective self-regulatory mechanisms in other encryption asset fields, with the aim of reaching a consensus with regulatory agencies.

Summary Outlook

Although the "Box Opening Order" officially requires a three-year transition period for implementation, the EU has already prohibited the use of self-custody wallets for anonymous encryption cryptocurrency payments. Opinions within the industry are divided on this issue. Some believe it may infringe on basic civil rights, while others support the EU's proactive attempt to regulate encryption assets.

In any case, the evaluation of the advantages and disadvantages of the "Opening Box Order" should be based on its subsequent implementation effects. As the first major jurisdiction to attempt comprehensive regulation of encryption assets, the EU's initiative will undoubtedly have a profound impact on global encryption asset regulation and is worth the industry's continuous attention.