The European Union (EU) has implemented a general ban on anonymity coins and covert cryptocurrency accounts that will come into effect on July 1, 2027. The measure is included as part of the recently adopted Anti-Money Laundering Regulation (AMLR), which targets increased transparency as well as counteracting illegal money laundering activities across the crypto industry.
Key Provisions of the AMLR
โข Ban on Privacy Coins: Cryptocurrencies that enable anonymous transactions, including Monero (XMR), Zcash (ZEC), and Dash, will be banned in the EU.
โข Prohibition of Anonymous Accounts: Banks and crypto-asset service providers (CASPs) will be prohibited from holding or managing anonymous accounts or wallets.
โข Forced Identity Verification: All transactions in crypto exceeding โฌ1,000 will need to be fully verified by identity, bringing crypto transactions in line with the standards applied in traditional banking.
โข Creation of AMLA: A new EU agency, the Anti-Money Laundering Authority (AMLA), will regulate large crypto companies in the bloc, specifically those with more than 20,000 clients or more than โฌ50 million in annual transaction volumes.
Implications for Stakeholders
โข Crypto Service Providers: Financial institutions and exchanges will have to introduce strong Know Your Customer (KYC) mechanisms and end services for privacy-oriented cryptocurrencies in order to adapt to the new regulations.
โข Privacy Coins Users: Holders or users of privacy coins in the EU will be impacted, as such assets will no longer be maintained on regulated exchanges. Peer-to-peer transfers and self-custody of such coins might still remain, but subject to greater scrutiny.
โข Market Dynamics: In spite of the looming ban, privacy coins such as Monero and Zcash have remained resilient, with recent price gains of 5% and 3%, respectively, reflecting sustained demand and possible migration to more friendly jurisdictions.
Global Context
The EU action is part of a wider global trend towards tighter regulation of privacy-oriented cryptocurrencies. South Korea and Australia have already delisted such coins from exchanges under regulatory pressure.
Although these steps are intended to stem illegal activities, they also create issues regarding individual privacy and the possibility of stifling innovation in the crypto sector. The long-term effect of such regulations on the adoption and growth of privacy-enhancing technologies is yet to be determined.
