Last month , the European Commission published a draft directive proposing to extend anti-money laundering (AML) regulation to both virtual currency exchange services and custodial wallet providers. The draft suggests that many Bitcoin companies operating within the European Union will need to apply know-your-customer (KYC) types of checks on their users, to be enforced by 2017.
Phrasing of the directive left some uncertainty over its extent, however —in particular over what are considered “wallet providers offering custodial services of credentials necessary to access virtual currencies.”
For clarification, Bitcoin Magazine reached out to E.U. representatives.
Intent
Speaking to Bitcoin Magazine , the E.U. representatives (who preferred not to be mentioned by name or quoted directly) explained that the concept and motive of the proposal is straightforward.
From the perspective of the European Commission, virtual currencies present a problem as they allow money to circulate easily, and it’s difficult to know who’s transacting with whom. To address this, the E.U. wants to set up checkpoints: Custodian wallet providers and exchange services would be required to monitor transactions on their platform and report suspicious activity.
Within that context, the representatives acknowledged that the proposed regulation should not apply to any services that happen to hold onto customer private keys. There is, for instance, no intention to regulate Lightning Network nodes or mining pool operators.
Custodial wallet providers, under the provision, are wallet providers that hold onto at least one private key for customers. Naturally, that includes wallet providers that hold full control over users’ private keys, such as Circle and Xapo. But it also includes services that hold onto a single key in a multi-signature setup, even if they can’t spend on behalf of customers, such as GreenAddress or Blocktrail. Wallet providers that do not hold any private keys at all — like Mycelium or Blockchain — […]
