The EU's regulatory measures targeting privacy coins are primarily based on the needs for anti-money laundering (AML) and combating the financing of terrorism, with a core focus on limiting excessively anonymous cryptocurrency tools. According to the newly disclosed draft of the EU anti-money laundering regulations in March 2025, the EU plans to prohibit enhanced privacy crypto asset tools, including privacy wallets and mixers, but allows self-custody wallets to continue being used. This policy direction reflects the following key points:

1. Regulatory Scope and Measures

Prohibition of Anonymizing Tools

The draft clearly prohibits mixers (such as Tornado Cash) that can hide transaction paths, as well as wallets with built-in privacy features. These tools are considered to potentially be used for money laundering and illegal fund transfers.

Self-Custody Wallet Exemption

Individually managed wallets (not third-party custodial) are unrestricted, but trading platforms need to strengthen monitoring of large transactions involving self-custody wallets.

2. Regulatory Logic and Controversies

AML Compliance Pressure

The EU believes that the anonymous characteristics of privacy coins (such as Monero XMR and Dash DASH) conflict with anti-money laundering principles. Previously, countries like Italy and Spain have required exchanges to delist certain privacy coins.

Industry Pushback and Technical Challenges

The cryptocurrency industry points out that a complete ban on privacy technology may hinder blockchain innovation and that it is technically difficult to completely shut down decentralized privacy tools. For example, mixer protocols can still operate autonomously through smart contracts.