EU Won’t Ban Non-Custodial Crypto Wallets 

The European Union (EU) authorities changed their mind about banning non-custodial wallets but introduced a new concept called “non-custodial addresses.” Now they plan to ban them. 

Members of the European Parliament once again discussed amendments to the new draft law on anti-money laundering. Previously, the legislative initiative planned to completely ban the use of “unhosted wallets,” but the position of lawmakers changed as they “do not want an outright ban on non-custodial services.” This is reported by The Block, citing the relevant documents. 

However, the European Parliament plans to ban privacy-enhancing crypto-assets and “anonymizing instruments,” including privacy crypto wallets or crypto mixers, under a new anti-money laundering bill. But now it’s clarified that these restrictions shouldn’t apply to “self-hosted wallets.”

Note that “unhosted” and “self-hosted” most likely refer to non-custodial crypto wallets. Meanwhile, European politicians introduce a new term — “self-hosted addresses,” meaning “non-custodial addresses.” With this new term, they plan to control users’ crypto accounts hosted by licensed digital asset service providers without banning non-custodial services in general. 

With this change, policymakers aim to clarify their objective of preventing non-custodial wallets from existing without being linked to an identified account on a crypto service provider like an exchange,” said Tommaso Astazi, Head of Regulatory Affairs at the lobby group Blockchain for Europe. The previous wording could’ve implied that crypto service providers in the EU would’ve been prohibited from engaging in non-custodial activities at all.

For non-custodial crypto wallets whose users can’t be identified, there would be a transaction limit of €1,000. In July 2022, the European Parliament tentatively approved a draft regulation of crypto-assets. It’s expected that the bill will enter into force in 2025, but so far, a regulatory sandbox for blockchain projects began to work in the European Union. 

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