Menu
The Chia Plot
  • Blog
  • How-To
  • About
  • Contact
  • Security
  • Discord
The Chia Plot
europe

Chia and the 2022 European Anti Money Laundering package

Posted on April 1, 2022April 1, 2022 by Chris Dupres

This week the Committee on Economic and Monetary Affairs (ECON) and the Committee on Civil Liberties (LIBE) of the European Union voted overwhelmingly to instill strong new regulations on cryptocurrency transactions, with no minimum limit, as part of their new anti money laundering package. This is first of its kind regulation in a major economy as it pertains to crypto, or really most transactions considering the lack of minimum amounts and it will have significant implications on people using crypto all over the world, but especially in Europe.

So what are the new regulations? In a nutshell in order to legally send crypto currency in Europe (if this passes into law) you will need to ensure that the party you are sending to has confirmed their identity and record that identity with your transaction. You will also be responsible for ensuring that the counterparty is not on a list of “high-risk entities” that the MEPs want the European Banking Authority to build and maintain.

Europe expects “cryptocurrency providers” to build technological solutions that will enable these regulations to be put into place while allowing users to continue to use cryptocurrency under these conditions. MEPs cite the Panama Papers and Pandora Papers as reason to eliminate secrecy, even though neither leak had anything directly to do with cryptocurrency and I’m fairly sure the European Parliament did not prosecute or punish those actually implicated in those scandals.

This is not finalized yet, and there are still some rough edges that they will need to smooth out and 3rd party organizations that would have to dedicate time and money to putting this into place. But those European Parliament Committees have spoken and their intentions are loud and clear, so it is highly likely that these regulations will be put into place soon, or something like them.

So how will this affect Chia and the people who transact with it? Well, if you are not in Europe and never plan to be in Europe, it probably doesn’t affect you. There is the possibility that they pro-actively identify non-European crypto users and refer them as high-risk to the EBA system, but that seems like a worst case scenario and not one I think we need to worry about yet. But if you are in Europe or regularly doing business in crypto with Europeans or EU companies then you will likely need to have at least part of your portfolio held in fully compliant wallets. Which for the time being means custodial wallets that have undergone a “Know Your Client” (KYC) process. The MEPs specifically call out privately held self-custodied wallets as requiring technological solutions to enable the identification of users they transact with.

For cryptocurrencies like Bitcoin its going to require complex off-chain infrastructure identifying wallets and addresses and people will need to be strict about ensuring that before they send a transaction that they have checked those lists and confirmed that the recipient has their identity known. This is going to be a lot of work, and create a lot of opportunity for middle-man friction. It also begins to eliminate a LOT of the benefit of Bitcoin if you have to check an https API for information in order to make a transaction. Once you have that as a critical part of the transaction process, why even bother with cryptocurrency; just use that same webserver and database. There will likely be a Bitcoin Improvement Proposal (BIP) to attach metadata functionality to transactions to satisfy these regulations if they come to pass, but those are a long and brutal process with no certainty of outcome.

For Ethereum things are probably going to be a little bit easier, but a LOT more expensive for users. There is no reason an Ethereum account cannot be identified to a person with KYC and wallets written that support transaction limitations. You can even attach metadata to transactions or use a smart contract to ensure that you are operating within the bounds of the law and to ensure that you cannot send to a restricted address. These are all possible on a smart chain, they will just require the development work to be done. The problem, as intimated, is the cost. Ethereum Mainnet is already intensely expensive to transact on and adding additional data to every transaction or requiring once simple transactions to move through a smart contract will make them even more expensive. So people will cut corners, as they do when paying insane prices per byte of code, and there will be problems in the news about broken KYC smart contracts and all sorts of exploits, the way we see with DeFi.

So how will this work on Chia? Well, without knowing the exact technical details of what the EU requirements will entail its impossible to know for sure how Chia will solve this problem, but I am fairly certain they will do it with DIDs and a “European transaction” puzzle. I don’t know exactly how Chia’s DID implementation will work, but they have said that they will follow the W3C standard being developed. How this will likely work for Europeans who want to transact with a self-custodied wallet legally will be that they will have to do KYC at an accepted authority, like a bank or the tax department, who will then sign a DID (Distributed IDentifier) to go into the users wallet as a token of some sort. That token will contain a serial number for the organization and the user and someone transacting with that wallet through an authenticated transaction will be able to query the identity provider to get the information they need to satisfy regulatory requirements. No signed DID, no transaction.

This is why certain people in the cryptocurrency and identity governance technology spheres have been so interested in DIDs, because it could be the next evolution of current federated authentication and authorization systems. Instead of having an account with an identity provider you use to prove who you are to other sites, you control the token that proves your identity with the identity provider merely vouching for you cryptographically. This means that the provider can disappear and as long as their public keys remains accessible and trusted by those seeking to identify you it will continue to work.

Now, neither the final regulations nor any Chia DID solutions have been released, so this is all conjecture but I am pretty confident that even if this isn’t the ultimate solution that European Chia users go with, it will look something like the above. Maybe the identity provider will provide an NFT and not sign a DID, depending on their capabilities. Maybe they will come up with something I haven’t even considered. But its looking like we are going to need something because merely getting rid of self-custodied wallets is not an option.

Related

2 thoughts on “Chia and the 2022 European Anti Money Laundering package”

  1. hugomaxwell says:
    April 2, 2022 at 9:33 am

    A token or NFT wont work because you can transfer it, essentially selling your identity.

    Reply
    1. Chris Dupres says:
      April 2, 2022 at 9:35 am

      I mean that’s true of any centralized service account, they don’t require constant re-certification

      Reply

Leave a Reply Cancel reply

Advertisement

Recent Posts

  • Crypto is burning down – Chia seems fine
  • Chia CAT upgrade fiasco part 2 – Was I wrong?
  • WTF just happened?? CAT1 to CAT2 “upgrade”
  • The era of the Chia NFT is upon us
  • Chia Blockchain 1.4.0 released – NFTs and DIDs oh my
  • Discussion
  • Facts About Farmers
  • How-To
  • Information
  • News
  • pools
  • Security
  • Trademark
  • Trading
  • Uncategorized

Dark Mode Switch

©2021 The Chia Plot - Donate XCH / MRMT / SBX @ xch1p4440d6zwu9ryta2vx073lq2ge3s29d37kskz6t34jp085e8srjqnk0gcr
We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept All”, you consent to the use of ALL the cookies. However, you may visit "Cookie Settings" to provide a controlled consent.
Cookie SettingsAccept All
Manage consent

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
CookieDurationDescription
cookielawinfo-checkbox-advertisement1 yearThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Advertisement".
cookielawinfo-checkbox-analytics11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checkbox-functional11 monthsThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checkbox-necessary11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-others11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-performance11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
JSESSIONIDsessionUsed by sites written in JSP. General purpose platform session cookies that are used to maintain users' state across page requests.
viewed_cookie_policy11 monthsThe cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
CookieDurationDescription
na_id1 year 1 monthThis cookie is set by Addthis.com to enable sharing of links on social media platforms like Facebook and Twitter
na_rn1 monthThis cookie is used to recognize the visitor upon re-entry. This cookie allows to collect information on user behaviour and allows sharing function provided by Addthis.com
na_sc_e1 monthThis cookie is used to recognize the visitor upon re-entry. This cookie allows to collect information on user behaviour and allows sharing function provided by Addthis.com
na_sr1 monthThis cookie is set by Addthis.com. This cookie is used for sharing of links on social media platforms.
na_srp1 minuteThis cookie is used to recognize the visitor upon re-entry. This cookie allows to collect information on user behaviour and allows sharing function provided by Addthis.com
na_tc1 year 1 monthThis cookie is set by the provider Addthis. This cookie is used for social media sharing tracking service.
ouid1 year 1 monthThe cookie is set by Addthis which enables the content of the website to be shared across different networking and social sharing websites.
Performance
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
CookieDurationDescription
d3 monthsThis cookie tracks anonymous information on how visitors use the website.
Analytics
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
CookieDurationDescription
__gads1 year 24 daysThis cookie is set by Google and stored under the name dounleclick.com. This cookie is used to track how many times users see a particular advert which helps in measuring the success of the campaign and calculate the revenue generated by the campaign. These cookies can only be read from the domain that it is set on so it will not track any data while browsing through another sites.
_ga2 yearsThis cookie is installed by Google Analytics. The cookie is used to calculate visitor, session, campaign data and keep track of site usage for the site's analytics report. The cookies store information anonymously and assign a randomly generated number to identify unique visitors.
_gat_gtag_UA_199099757_11 minuteThis cookie is set by Google and is used to distinguish users.
_gid1 dayThis cookie is installed by Google Analytics. The cookie is used to store information of how visitors use a website and helps in creating an analytics report of how the website is doing. The data collected including the number visitors, the source where they have come from, and the pages visted in an anonymous form.
CONSENT16 years 4 months 5 daysThese cookies are set via embedded youtube-videos. They register anonymous statistical data on for example how many times the video is displayed and what settings are used for playback.No sensitive data is collected unless you log in to your google account, in that case your choices are linked with your account, for example if you click “like” on a video.
Advertisement
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
CookieDurationDescription
advanced_ads_browser_width1 monthThis cookie is set by Advanced ads plugin.This cookie is used to measure and store the user browser width for adverts.
anj3 monthsNo description available.
CMID1 yearThe cookie is set by CasaleMedia. The cookie is used to collect information about the usage behavior for targeted advertising.
CMPRO3 monthsThis cookie is set by Casalemedia and is used for targeted advertisement purposes.
CMPS3 monthsThis cookie is set by Casalemedia and is used for targeted advertisement purposes.
CMRUM31 yearThis cookie is set by Casalemedia and is used for targeted advertisement purposes.
CMST1 dayThe cookie is set by CasaleMedia. The cookie is used to collect information about the usage behavior for targeted advertising.
DSID1 hourThis cookie is setup by doubleclick.net. This cookie is used by Google to make advertising more engaging to users and are stored under doubleclick.net. It contains an encrypted unique ID.
i1 yearThe purpose of the cookie is not known yet.
IDE1 year 24 daysUsed by Google DoubleClick and stores information about how the user uses the website and any other advertisement before visiting the website. This is used to present users with ads that are relevant to them according to the user profile.
KADUSERCOOKIE3 monthsThe cookie is set by pubmatic.com for identifying the visitors' website or device from which they visit PubMatic's partners' website.
KTPCACOOKIE1 dayThis cookie is set by pubmatic.com for the purpose of checking if third-party cookies are enabled on the user's website.
mc1 year 1 monthThis cookie is associated with Quantserve to track anonymously how a user interact with the website.
test_cookie15 minutesThis cookie is set by doubleclick.net. The purpose of the cookie is to determine if the user's browser supports cookies.
uid1 year 1 monthThis cookie is used to measure the number and behavior of the visitors to the website anonymously. The data includes the number of visits, average duration of the visit on the website, pages visited, etc. for the purpose of better understanding user preferences for targeted advertisments.
uuid3 monthsTo optimize ad relevance by collecting visitor data from multiple websites such as what pages have been loaded.
uuid23 monthsThis cookies is set by AppNexus. The cookies stores information that helps in distinguishing between devices and browsers. This information us used to select advertisements served by the platform and assess the performance of the advertisement and attribute payment for those advertisements.
VISITOR_INFO1_LIVE5 months 27 daysThis cookie is set by Youtube. Used to track the information of the embedded YouTube videos on a website.
YSCsessionThis cookies is set by Youtube and is used to track the views of embedded videos.
yt-remote-connected-devicesneverThese cookies are set via embedded youtube-videos.
yt-remote-device-idneverThese cookies are set via embedded youtube-videos.
Others
Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.
CookieDurationDescription
__gpi1 year 24 daysNo description
adImpCountpastNo description
C3UID5 yearsNo description available.
C3UID-9245 yearsNo description
fc5 months 27 daysNo description available.
pfpastNo description
pxs5 months 27 daysNo description available.
SAVE & ACCEPT
Powered by CookieYes Logo