EU Plans to Prohibit Trading of Privacy Coins Starting from 2027
The European Union has taken a significant step in combating money laundering and terrorist financing with the adoption of new rules, effectively amounting to a ban on privacy coins like Monero (XMR). This regulation, known as Regulation 2024/1624, is part of a broader package of regulatory frameworks aimed at addressing these issues.
The new rules address cryptocurrencies at several points, with a focus on prohibiting the provision and faithful custody of anonymous crypto-asset accounts and accounts that allow the anonymization or enhanced obfuscation of transactions. Crypto service providers, including exchanges, will have to ensure they do not provide services to shell companies and identify and verify wallet owners.
The regulation also covers the regulation of transactions with institutions and service providers in third countries with lax anti-money laundering rules. The Anti-Money Laundering Authority (AMLA), a new European authority to be established in Frankfurt starting July 1, 2025, will be responsible for coordinating European anti-money laundering supervision and developing guidelines addressing specific requirements for crypto service providers.
The AMLA's guidelines will define specific rules for service providers, including the handling of shell companies, 'self-hosted' wallets, and third countries. The creation of a central supervisory authority could bring some relief for service providers. AMLA will coordinate European anti-money laundering supervision and develop guidelines by July 10, 2027.
The ban only applies to service providers like exchanges and does not apply to users or manufacturers of hardware or software wallets or providers of self-hosted wallets. Most users will not experience significant changes as privacy coins like Monero are already delisted by most exchanges.
Transparent cryptocurrencies fit well into regulation due to the traceability of transactions. However, privacy coins like Monero, where transactions are no longer traceable, continue to cause headaches for European legislators. The guidelines are expected to cover the regulation of privacy coins like Monero, mixers, and other anonymous cryptocurrencies.
The identification of personal wallets is already underway in line with the Travel Rule. Exchanges and other crypto-service providers may not offer privacy coins nor mixers. The ban is set to come into force in 2027.
The establishment of the AMLA in Frankfurt is a significant step towards strengthening the European Union's anti-money laundering efforts. The new regulations aim to prevent the misuse of the financial system for money laundering and terrorist financing, contributing to a safer and more secure European financial landscape.
