Once this law is enacted, transfers between crypto service providers and unhosted wallets will be tracked. This will help in identifying and blocking suspicious transactions. Unhosted wallets are referred to by the Financial Action Task Force and the Financial Crimes Enforcement Network of America. It means a person maintains his private keys which is called wallet or self-hosted wallet in crypto industry. It differentiates between a financial institution acting as a custodian or an asset controlled by an individual.
The final voting on this regulation related to unhosted wallets is to be held. A bill related to this can be discussed between the European Commission and the European Council this month. The new provisions could add to the difficulties for self-hosted wallets. Further changes can be suggested by the European Commission and the European Council.
Recently the EU’s securities, banking and insurance regulators warned that there is a risk of people investing in cryptocurrencies losing their full amount. In a joint statement issued by the three EU authorities, it was said that if people buy these assets, then there is a high risk of losing the entire amount of their investment. This was a direct warning from the EU authorities to the people regarding crypto assets. This indicates that those investing in crypto have no protection or compensation provision under the Financial Services Act of the EU. Regulators are concerned that the number of people investing in cryptocurrencies, including Bitcoin and Ether, is increasing. Bitcoin and Ether account for 60 percent of the total crypto market. Regulators say that people are not aware of the risks associated with cryptocurrencies.
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