Privacy coins trading to be outlawed by the European Union starting from 2027
The European Union has enacted a new package of regulations aimed at combating money laundering and terrorist financing in the cryptocurrency sector. The regulations, which take effect from 2027, prohibit the provision and custodial holding of anonymous crypto-asset accounts and accounts that allow the anonymization or enhanced obfuscation of transactions.
The package includes Regulation 2024/1624, introduced by the European Parliament in mid-2024. The regulations address cryptocurrencies in several sections, including anonymous cryptocurrencies, mixers, shell companies, "self-hosted" wallets, and third countries.
Crypto service providers will be required to ensure they do not provide services to shell companies and must identify wallet owners. Transactions with institutions and service providers in third countries with lax money laundering regulations will be regulated.
The regulations are part of a broader effort to prevent the misuse of the financial system for money laundering and terrorist financing. Privacy coins like Monero, where transactions are no longer traceable, continue to pose challenges for European lawmakers. However, for most users, changes will not be substantial as privacy coins have already been delisted by most exchanges, and wallet owner identification in accordance with the Travel Rule is already beginning.
The European Anti-Money Laundering Authority (AMLA) will be established in Frankfurt on July 1, 2025, with the European Union founding it. By the end of 2027, AMLA will employ about 432 staff and will have the authority to directly supervise selected large credit and financial institutions with relevant risk profiles, issue sanctions and measures, strengthen cooperation between national Financial Intelligence Units (FIUs), and ensure uniform application of EU anti-money laundering laws, particularly the AML Package effective from July 10, 2027.
The establishment of AMLA could bring some relief for service providers. Transparent cryptocurrencies fit well within regulations due to the traceability of transactions. However, for businesses, tighter regulation is likely to mean additional compliance effort.
The prohibitions apply to service providers such as exchanges, but not to users or manufacturers of hardware or software wallets. The guidelines will also regulate dealing with third countries.
AMLA will coordinate European anti-money laundering supervision, ensuring a unified approach to combating money laundering and terrorist financing in the cryptocurrency sector. These regulations effectively amount to a ban on privacy coins such as Monero (XMR).
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