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### [So yesterday we got the Crypro Crackdown on Private Wallets](https://peakd.com/hive-167922/@tobetada/crypto-fud-europe-votes-for-bitcoin-privacy-busting-rules)

This is imo the biggest FUD for crypto in the Eurospace we have ever had. Cracking down on private wallets is essentially targeting the crypto industry at its core. The goal is to regulate the industry to such a point that all privacy is nonexistent. So much is clear at least and always has been when one understands how nation states operate. 

[First, this isn't law yet.](https://www.coindesk.com/policy/2022/03/31/eu-parliament-votes-on-privacy-busting-crypto-rules-industry-rails-against-proposals/) So things could still turn for the better. But my gut feeling says it won't because there is essentially no reason for why such a law shouldn't pass. There are only pros in the view of Big Brother. Sure, it will mean that the innovation of the crypto industry in Europe will be severely mitigated, but who needs crypto anyway, right? I definitely think that most politicians see this industry as a nuisance rather than something that can add value and wealth to the state as such.

### Regulation isn't necessarily bad

I am not against regulation of an industry per se. The pros are that it makes the rules of conduct  much more transparent and regulates how things should be handled. This means that everyone knows what to expect and how to interact with such an industry. But too much (or too bad) regulation can cripple an entire industry. The reason for doing this comes from fear or lack of knowledge of an industry or also active attempts at thwarting the potential of a disruptive impact on the status quo. 

### But it can be 

The regulation proposed here is bad for several reasons. First, the justification for implementing it is based on a false sense of illicit activity going on in this industry. The article above, e.g., mentions that such activity for Bitcoin accounts for only about 0.15% of the transactions. This is incredibly small (obviously it might be bigger), compared to the #1 medium where such things are done: **cash**. Cash is probably still king in this area and if politicians were serious they would ban cash. Obviously this is in preparation with CBDCs that could perhaps pop up in some years. 

Second, the proposed changes might be quite easy to circumvent. If so, it doesn't really address the reason for intoducing them. However, it is still not entriely clear hwo this will actually be implemented, so we have to wait and see. Nevertheless, I want to raise some questions here:

- Will this law aim to outright ban private wallets from interacting with CEXs? This would mean that one couldn't even send funds from private wallets to CEXs which is crazy. Or does it mean that CEXs will have to confirm the idenity of the owner of that private wallet? If so, how would they do this? These people are not customers of the exchange so a lengthy KYC is a violation of personal privacy. Would a simple passpot picture suffice? If so, there would be a lot of fraud... So that also doesn't seem to be likely. It could also be that one could link one's private wallet.  But in that case would the CEXs gather all of the transaction history of that wallet? Wouldn't they have to follow up on all the transactions of that said wallet?

- This brings me to the perhaps easier than thought ways of circumventing this. Would it not be possible to simply send private transfers to a wallet which is then linked to a CEX? If so, this wouldn't change anything. Everyone could still use private wallets that are linked to one's identity; but these wallets could still accept any funds desired. Also, would it not still be possible to open an account on a CEX (KYCed) *outside* of Europe and send funds to the CEX located *inside* of Europe? If so, this also wouldn't really change anything, other than making it more difficult to send funds. And lastly, it is not always necessary to open a CEX account in Euope as exchanges outside of Europe also have withdraw options available besides than SEPA. For example, it could still be possible to withdraw using Paypal.

### A Wedge between crypto and fiat

With this regulation and more to come nation states are trying their best to deepen the chasm between the "cryptosphere" and the "fiatsphere". It is their ultimate horror that people would be able to bridge this gap effortlessly by shopping with crypto or paying a house with it. That is a big no-no. Therefore, the bridge connecting the two realms needs to be completely controlled. Will this be possible? 

### Surpassing nation state boundaries

One of the weaknesses to this is that these rules end with the border of the nation state. If you live in Switzerland or the UK you live in Europe, but are not affected by this regulation as they are not part of the European Union. So there is wiggle room. Quite a bit actually. But these possibilities come of course with a trade off. It would mean that one would have to move one's physical location to such a place and separating social and work ties among quite a few other. Nevertheless, it is still an option. So there's that...



 

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*As a general reminder: Please keep in mind that none of this is official investment advice! Crypto trading entails a great deal of risk; never spend money that you can't afford to lose!*


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