European Union lawmakers decided last week Friday to back tougher safeguards for transfers of bitcoin and other cryptocurrencies, in the latest sign that regulators are tightening up on the crypto sector. Two committees in the European Parliament narrowly voted to require not only exchanges, but also "obliged entities", to obtain, hold, and submit information on those involved in transfers. It is yet to be understood who the obliged entities are in case of transfers between unhosted wallets. The suggested law increases regulatory demands for crypto payments and is in response to recommendations from the global Financial Action Task Force that sets standards for combating money laundering.
Lone Fønss Schrøder, CEO of the Swiss based blockchain company Concordium says, “The new draft regulations require significant changes in the way current cryptocurrency transfers are made. It may be a huge challenge for the decentralized crypto solutions that hold anonymity as a core value and are committed peer-to-peer (P2P) and self-custody. Moreover, many projects could be held back by their community from changing their solutions”.
Lone Fønss Schrøder adds: “Crypto currency regulation has been a hot topic across world governments for some time. Although blockchain is by nature decentralized, with its P2P exchange and self-custody, it has been clear to us at Concordium that regulation was inevitable. From inception we anticipated this, and have uniquely incorporated an encrypted identity stamp into the protocol layer of our blockchain. This is done without compromising GDPR.”
Zero-knowledge-proofs (ZKP) allows parties to verify information without exchanging or storing that information on-chain other than hash functions. Concordium is already capable of soliciting and validating ZKPs and we’re currently building this capability into our wallets. If required by a court order, personal data can be uncovered through a legal process by an independent network of “identity revokers” vis a vis the ‘identity verifiers’.
The solution is unique as it balances the requirements of regulation with individual privacy as required by GDPR.“Concordium is by design and philosophy ready to implement solutions and processes needed to comply with regulations of blockchain based applications - using techniques developed by leading researchers'', says Fønss Schrøder. “Together with our very low and stable transaction fees, high transaction speed and finalization without possibility of rollbacks, we are uniquely positioned to offer forward-thinking businesses, application developers, and cryptocurrency traders unrivaled security, privacy, transparency and most importantly, regulatory compliance”.
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