A ray of hope for the European crypto ecosystem? The German government has positioned itself against the systematic monitoring of self-hosted wallets. However, it remains very much in favor of global monitoring.
Monitoring of self-hosted wallets sparks debate in Europe
Last March, the European Parliament’s Economic and Monetary Affairs Committee (ECON) had published a proposal that caused a stir within the crypto ecosystem. It planned to monitor all cryptocurrency transactions regardless of the amount, including those that pass through self-hosted wallets.
In effect, this would mean that centralized entities such as exchange platforms would be obliged to collect information about people making transfers to and from Ledger wallets, or any other wallet not based on a central platform.
In addition to the ethical issues this raises, the measure could give a big boost to the development of the crypto industry in Europe. Indeed, one can imagine that the major exchanges could simply ban the use of self-hosted wallets, which are nevertheless one of the cornerstones of the ecosystem.
Germany stands out in opposition to surveillance proposal
European governments, which are rather fond of monitoring the cryptoasset sector, hadn’t particularly flinched at the prospect. However, Germany has just stood out. In a letter written by State Secretary of Finance Florian Toncar, which went relatively unnoticed in April, we learn that he is not in favor of such monitoring.
According to the Secretary of State, Germany already complies with particularly strict demands, in line with the recommendations to combat money laundering and terrorist financing:
“The demands of the European Parliament that you mention are already fulfilled by the provisions of the federal government […]. This relates to full verification of customers and recipients of self-hosted wallets, as well as non-suspicious message checks for certain crypto asset transfers.”
He further believes that money laundering risks are already addressed by existing regulations:
“As far as the position on possible money laundering risks in the case of self-hosted wallets is concerned, this has so far been ensured by identification, with the exception of an additional verification requirement.”
Instead, the German government plans to rely on on-chain analysis tools, as the Secretary of State states:
“The federal government will [prepare measures] to allow crypto service providers to use blockchain analytics tools to assess the risks of the respective transfers […] and act accordingly. This results in full verification even with transfers to and from self-hosted wallets whose holders are identified.”
Make no mistake, however: Germany remains in favor of monitoring crypto-assets, and it simply considers the tools in place to be sufficient at this stage. Still, it’s rare to see a government go against ever more oversight of the crypto ecosystem, so that’s a point worth making.
