As inflation and economic disruption increase around the world, ostensibly stable governments look to increase controls on cryptocurrency.
In late March, the EU Parliament’s Committee on Economic and Monetary Affairs approved a new rule to the existing Transfer of Funds Regulation that would prevent regulated entities from interacting with self-managed wallets, propagandistically referred to as “unhosted,” without first undertaking invasive “know-your-customer” data collection.
When you send a large amount of money from one bank to another, for instance, both banks will know who you are and the details of your transaction.
Individuals and businesses are usually not required to keep this information anytime someone wants to pay with cash.
If we were required to take down this information every time we interact with cash in some way, our quiet system of financial surveillance would be much more obvious.
If governments can secure these controls on sovereign transactions today, they can exert them in the future when many more may turn to cryptocurrency.
And some parties may simply be unwilling to dox themselves to the European Union just to send a transaction.
But it could, and did, lean against regulated entities to cut off activities to wallets associated with the protest.
The Financial Action Task Force, a global standards-setting body for financial surveillance rules, is also opposed to the broad use of self-hosting.
Bitcoin critics point to rules like this and argue that the pursuit of financial sovereignty through technology is futile.
But note that these rules are being imposed on already-regulated entities, not individuals who host their own data and money.
Right now, we have a window of time where we can use existing bridges between the crypto and fiat economies to learn about these tools and prepare.
As inflation, financial surveillance, and shortages continue largely unabated, the need for a reliable and independent currency and payment system free from government control will only become more pressing.
Andrea O’Sullivan is the Director of the Center for Technology and Innovation at the James Madison Institute in Tallahassee, Fla.