No, the European Union Is Not 'Banning Anonymous Crypto Wallets'

The E.U. Commissioner for Financial Services may have misunderstood the meaning of her own statement. The reality is hard to imagine.

AccessTimeIconJul 21, 2021 at 5:17 p.m. UTC
Updated Feb 9, 2023 at 1:18 p.m. UTC
AccessTimeIconJul 21, 2021 at 5:17 p.m. UTCUpdated Feb 9, 2023 at 1:18 p.m. UTC
AccessTimeIconJul 21, 2021 at 5:17 p.m. UTCUpdated Feb 9, 2023 at 1:18 p.m. UTC

In a series of shocking statements early yesterday, European Commission regulators declared that they were “banning anonymous cryptocurrency wallets” as part of a money laundering crackdown. This understandably sent crypto markets tumbling – but they quickly recovered, apparently as it became clear the E.U. had woefully misrepresented the substance of the proposed regulation.

The crypto provisions (PDF) were part of a package of four proposals intended to fight money laundering. In a tweet thread summarizing the proposed rules, Mairead McGuinness, the E.U. Commissioner for Financial Services, wrote that the measure “will ban anonymous crypto wallets and make sure that crypto-asset transfers are traceable.”

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If that sets your hair on fire, take a deep breath. I try not to use the F word, this being a family publication, but this is one of the rare appropriate instances: The statement from McGuinness is straight-up FUD. Rather than a ban on crypto wallets, the E.U. rules would impose tighter but defensible rules on money service providers, such as exchanges or custody services. Either McGuinness and her communications team misspoke out of genuine ignorance when describing the new rules to the public, or they knowingly obfuscated as a way to misdirect public perception.

As Tim Copeland at The Block pointed out, the new rules would be very similar to the “travel rule” guidelines from the multinational Financial Action Task Force. The rules prohibit providing anonymous services, such as crypto custody or exchange accounts provided by a third party, not the provision of software for self-custody.

In short, the ban would impact the crypto equivalent of Swiss bank accounts, not the use of crypto as cash. So if you’re willing and able to self-custody (which you should really be doing anyway), you can still hold and spend crypto anonymously (unless you do commit a crime, then that anonymity probably won’t last long).

“Banning anonymous wallets” would be a truly terrifying goal, because nearly every cryptocurrency wallet is anonymous by default, in the same sense that every web browser is anonymous by default. Wallets like MyCrypto, Exodus and Electrum are software, available for download worldwide. The notion of “banning anonymous crypto wallets,” in other words, implies an utterly draconian crackdown involving raids on server farms hosting wallet code, SWAT teams battering down the doors of DeFi degens’ basement apartments, and developers on trial for helping people move data around.

Unsurprisingly, many news outlets reported McGuinness’s statements without examining them. Some even further distorted the essence of the new rules, such as the Irish Times’ laughable declaration that the E.U. would “ban cryptocurrency anonymity,” full stop.

In the face of such credulous headlines, crypto prices briefly swooned, with Bitcoin dropping below $30k. But the ship righted itself quickly and BTC surged back above $31.5k by this morning. That could have been for any number of reasons, but it’s reasonable to guess the resurgence came as traders figured out that the EU was not, in fact, “banning anonymous crypto wallets.”

It’s a mixup that drives home the point that cryptocurrency regulation is too often being created by people who know next to nothing about the technology. (McGuinness also justified the new regulations by leaning hard on the idea that cryptocurrency is a huge new money laundering threat, which simply isn’t true.)

At the same time, it does seem improbable that a high-ranking EU Commissioner, with a staff (mostly) of adult professionals, could get something so basic wrong. So here’s the alternative explanation for the realpolitik crowd: The E.U. knows it can’t “ban anonymous crypto wallets.” But by obfuscating the difference between custodial wallets and self-custody software, they may hope they can mislead some portion of the public into thinking that custodial accounts are the only kind that exist.



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David Z. Morris

David Z. Morris was CoinDesk's Chief Insights Columnist. He holds Bitcoin, Ethereum, and small amounts of other crypto assets.


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