Recent European Parliament developments on “unhosted wallets” regulation highlight the growing need for the uncompromising decentralization of asset custody and exchange.
More insight from the Particl Project, see also the Project Development Progress report and their GitHub status at the base of this article.
Recent European Parliament developments on “unhosted wallets” regulation, passed under the guise of legislation against money laundering and terrorism financing, highlight the growing need for the uncompromising decentralization of asset custody and exchange in the cryptocurrency world.
Regular users, heavily targeted by the ruling, saw many of their freedoms treated as contingencies by the European regulatory body — once again demonstrating to those affected that they must carve their own path.
MiCA & TFR: Dinosaurs’ Attempt to Rule the Web
The European parliament passed this week new wide-ranging regulations touching several aspects of the cryptocurrency ecosystem. The texts, dubbed MiCA (markets in Crypto Assets) and TFR (Transfer of Funds), aim to “ensure crypto-assets can be traced in the same way as traditional money transfers”. Moreover, they will stand for every country in the union, without the possibility for individual nations to hold a contradictory framework for regulating the target entities.
While notably introducing rigid rules for creating and maintaining stablecoins, MiCA also establishes a regulatory entity similar to the DASP, or Digital Asset Service Provider licensing authority. ‘Over-collateralized’ stablecoins, even those with a proven track record such as Dai, fall on the wrong end of this supranational ruling; only stablecoins with proven and audited 1:1 fiat reserves held by licensed third-party custodians will benefit from compliance with the new law. Decentralized finance and DAOs are not addressed in the ruling, leaving some question marks as to their current and future legal status in Europe, but it's easy to see where this is going in a longer timeframe.
An attempt was also made to further oversee what EU regulators creatively dubbed “un-hosted wallets” — wallets to which the user itself owns the private keys. While miraculously stopping short of legislating transfers between individual private wallets, this new regulation will impose KYC requirements on transfers between a cryptocurrency exchange and personal wallets for amounts going above 1000 euros.
This partial inclusion entails that Europe will require the ability to verify whether this “un-hosted wallet” is effectively owned or controlled by users residing within the union; all exchange platforms and individual wallet owners will need to be identifiable and subject to scrutiny in order to abide by the ruling.
Although Germany’s intervention ultimately derailed the more pernicious aspects of this attack on true asset ownership and privacy, the rhetoric around this in extremis last-hour reversal of only some of the most extreme aspects of the law reinforces all we need to know about the regulatory bodies trying to dictate what the future of money will be.
Uncompromising Privacy, Self-Custody, and Decentralization
People familiar with cryptography will understand that these frameworks will do next to nothing to curtail money laundering and terrorist funding — it is, instead, a textbook manifestation of regulators’ constant need to justify their legislative powers. These rulings, while unsurprising, highlight the growing need for an uncompromising decentralization not only of asset custody but also of standard trading exchange environments within the cryptocurrency world.
Liberating Society From Out-of-Touch Dinosaurs
Central to Particl’s vision is enabling a truly private, decentralized, and free (as in freedom) circular economy where you can freely participate without national and supra-national entities forcing their invasive and restrictive policies on you.
This paradigm shift requires a technological revolution that puts you, not corporations or special interest groups, at the very center and allows you to live completely "outside of the system" and of their reach.
Such an environment inevitably involves the moving and trading of assets — a role our upcoming and open-source BasicSwap decentralized exchange helps fulfill. It also involves complex activities such as commerce, a critical economic activity sector being liberated by Particl’s fully decentralized marketplace. But there's also information and its capacity to flow freely and safely between people without friction or middlemen with no room for identifiable data or central authorities. That's where a distributed, server-less messaging system, where all messages are encrypted by default before being uploaded to the network, gets all the spotlight.
Total privacy, distributed services, and strong encryption are, once again, pushed to the forefront. These solutions, when used to their full potential, offer nothing but a complete technological revolution against the backward ideologies and interests of nearly all national and supranational legislative bodies around the globe.
Because on their turf, the fight is never over — only battles are won, one at a time.
Signoff from the Particl Project
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