The European Union (EU) reached a deal on Wednesday regarding anti-money laundering rules that would apply to a large number of cryptocurrency transactions.

The new rules aim to prevent money laundering and terrorist financing, among other crimes, by requiring crypto-assets service providers to collect and store information identifying people involved in cryptocurrency transactions, as well as hand the information over to authorities that are conducting investigations. The new regulations, however, will not impose the tracking requirements on private, unhosted wallets that the EU Parliament initially planned in March.

The regulation has “no minimum thresholds nor exemptions for low-value transfers” and applies to all transactions involving service providers, such as cryptocurrency exchanges, regulated under the EU, according to a press release posted on the European Parliament's website.

“We are putting an end to the wild west of unregulated crypto, closing major loopholes in the European anti-money laundering rules,” Ernest Urtasun said, a member of the European Parliament, in a tweet announcing the agreement.

Pseudonymity is one of the central functions of cryptocurrency transactions and the new rules would mean that people’s identities could potentially be tied to a large number of transactions or even blocked. It will enable the flow of cryptocurrencies to be traced much in the same way that money transfers currently are in the EU using fiat currencies.

The regulation does not apply to transfers between individuals using wallets that do not utilize a service provider. This means, for instance, that an Ethereum transaction between two MetaMask wallets would not be subject to anti-money laundering checks.

But if someone interacts with a wallet hosted by a service provider, like Coinbase, FTX, or another exchange, the new rules would apply, regardless of the transaction’s size. And in the event the transaction is more than 1,000 euros, the service provider would have to verify the identity of the owner of the private wallet being used in the transaction.

The new measures will insure that service providers are not facilitating transactions that involve organizations under economic sanction by the EU or could potentially lead to terrorist financing by requiring providers to check the source of assets in cryptocurrency transactions using wallets they host.

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“For too long, crypto-assets have been under the radar of our law enforcement authorities,” Assita Kanko said, a member of the European Parliament.

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