25th March 2024 > > The EU, cash, & cryptos.

tl;dr

New cash laws in the EU will encourage crypto adoption, whilst the references to crypto wallets are of no import whatsoever.

Market Snap

Market Wrap

The positive start out of Asia is likely in expectation that the ETF outflows from GBTC will reduce enough that we return to seeing net inflows across the ETFs on a daily and weekly basis. Though short-term price predictions are notoriously unreliable (so pay no attention to me) I suspect if we have a couple of days of decent-sized inflows we will be threatening a new ATH.

I am already getting excited about being able to report a breach of the 8-handle …

Curious Cryptos’ Commentary – The EU

There have been many denigrating and derogatory comments about the EU over the years. Some may have been a touch excessive, a little bit of hyperbole perhaps, but the substance of those comments resonates with those who get to vote in a referendum. And no, I am not just talking about 2016 and the UK.

For those that decry the EU, I have only to point out that MiCA – the global leader in crypto regulation – is an EU construct, and the EU rightly takes plaudits for it.

Its passage through the three legislative bodies, and the three Presidents of the EU – all of whom are employed at the same time however ridiculous that may sound – merely enhances its legitimacy. I mean the legitimacy of MiCA, not the EU, natch.

The vested interests of TradFi, the misplaced understanding of the environmental lobby, the desire from some of the political elite to enforce control and coercion with the advancement of CBDCs – all of these forces were beaten to allow MiCA to come to fruition.

Some may be cynical and comment that MiCA is simply an attempt to accrue tax dollars. You may have a point. But in what other areas of human activity do government bodies not try to accrue tax dollars? If you do know of any, tell me, and that is where I will expend all the energy of my life from now on.

…

Given my wholehearted support of the EU (on this subject and some others) I was a bit taken aback by the misreporting of a new regulation promoted by the EU:

https://www.europarl.europa.eu/meetdocs/2014_2019/plmrep/COMMITTEES/CJ12/AG/2024/03-19/1297044EN.pdf

Couched as an anti-money laundering regulation (oh the irony of that statement from the organisation that gave us a EUR 500 note which now dominates wholesale drug trafficking within Europe), it has three major statements within its hefty 329 pages which we need to disassemble and understand.

The first two concern cash, and should concern us all.

Subject to the three-year implementation timeline (and plenty can change in that time) it will be illegal to make a payment in cash of over EUR 10,000. All those wholesale drug-dealers and terrorists are unlikely to pay attention to this new addition to their list of crimes. It really does not sound like much of a deterrent to me, so there must be some other motivation for it.

Anonymous cash payments of over EUR 3,000 will also be made illegal. Again, I doubt that mid-ranking drug dealers are going to pay much attention. For those citizens who are usually law-abiding but maybe pay for building work in cash (a not too uncommon event I have been told) are already deliberately evading VAT for themselves, and evading income tax for the builder. Again, the new measure does not sound like a deterrent. There must be some other motivation for it.

Patrick Beyer, an MEP for the Deutsche Piraten Partei which grew out of the Occupy movement a few years ago, was one of only two MEPs who voted against the new measures. Patrick is not happy:

“This EU war on cash will have nasty repercussions! For thousands of years, societies around the world have lived with privacy-protecting cash. With the creeping abolition of cash, there is a threat of negative interest rates and the risk of banks cutting off the money supply at any time. Dependence on banks is increasing at an alarming rate. This kind of financial disenfranchisement must be stopped.”

His libertarian instincts are there for all to see.

Strangely his bedfellow was Gunner Beck, who is a member of AfD. When both libertarians and authoritarians agree that a law is bad, then it probably is.

…

The bit that relates to cryptos is the bit that has been misreported.

The legislation proposes that crypto payments to “hosted wallets” can only come from identified self-custody crypto wallets.

What does this mean in practice?

“Hosted wallets” are those that store cryptos on behalf of individuals. Centralised cryptocurrency exchanges and custodial services provided by TradFi are included in this definition.

Self-custody crypto wallets refer to your private keys held by a Ledger Nano, or MetaMask, or any one of the plethora of wallets out there.

I see commentators on X and some news outlets making outlandish claims along the lines that this new regulation kills cryptos in the EU.

What utter tosh.

You cannot sign up to a CEX, or a custodial service, without going through lengthy AML and KYC procedures. Anyone who does so has already been doxxed. Transferring cryptos from a self-hosted wallet to a CEX identifies you as the owner of that wallet. Perhaps under the new legislation you have to make that explicit, but seriously there is no real difference.

The legislation makes no mention of transfers between self-custody crypto wallets, for indeed there can be no enforceable rules about on-chain transfers between these types of wallets. If you are concerned about your privacy (as you should as a matter of principle) then have one doxxed wallet for interacting with the centralised world, and keep all your others undoxxed for interacting with the decentralised world.

I see no obvious issues, but please correct me if I am wrong.

That means we can all relax. The EU remains open for crypto business.e.