On Tuesday, besides prohibiting anonymous crypto transactions, the EU’s executive arm also added anonymous crypto asset wallets to its prohibition list, requiring the full application of AML/CFT rules to ensure complete traceability.

This created some confusion as to what exactly the crypto wallets meant here, which the European Commission confirmed is not applicable to non-custodial privacy wallets rather only to exchanges.

“Indeed, open-source, non-custodial wallets, will not be covered by the prohibition,” an EC spokesperson told Cryptonews.com.

Anti-money laundering (AML) frameworks are only applied to actors that are gatekeepers of the financial system, which in crypto means VASPs like exchanges that provide virtual asset services.

“But this requirement does not apply to un-hosted wallets that are retained by the users themselves,” the spokesperson added.

This week, European Union (EU) policymakers proposed tightening regulations on the cryptocurrency sector by prohibiting the anonymous transfer of crypto assets and requiring companies to collect data on both senders and recipients as part of its broad plan to crack down on money laundering and terrorist financing.

“The present proposal aims at introducing in EU law these new requirements of the VASPs, by providing an obligation for these actors to collect and make accessible data concerning the originators and beneficiaries of the transfers of virtual or crypto assets they operate,” reads the proposal.

The law, as we reported, basically extends the Financial Action Task Force’s “travel rule” that applies to wire transfers to the entire crypto industry.

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