As the European Union lawmakers backed stricter safeguard measures for crypto transactions on Thursday, the market was quick to react, with the price of Bitcoin dropping more than 4% over the last day.
The benchmark cryptocurrency briefly hit $48,000 on Monday, which, at that time, amounted to an impressive 9.3% rally from just days before.
Now, Bitcoin has returned most of those gains with its latest move.
The consequent dip took Bitcoin to a daily low of $44,432 in the early hours on Friday, before a slight rebound to $45,181 at press time, according to data from CoinMarketCap.
The bulk of other major cryptocurrencies is currently in the red too, with the likes of XRP, Cardano (ADA), Terra (LUNA), and Polkadot (DOT) all shedding between 4.5% and 6% of their value.
Ethereum (ETH), the industry’s second-largest digital asset by market cap, is down 3.6%, currently changing hands at $3,275, per CoinMarketCap.
The only cryptocurrency among the top ten to stay in the green is Solana (SOL), which is up 1.05% over the last 24 hours, trading at $125.34 at press time.
EU cracks down on non-custodial wallets
The latest dip may be related to news around the European Parliament's recent vote to tighten up regulation on crypto transactions.
The approved proposal would require crypto service providers, such as regulated exchanges, to obtain and hold personally identifiable information from individuals making transactions using so-called unhosted or non-custodial crypto wallets.
"In the case of a transfer of crypto-assets from or to a crypto-asset wallet not held by a third party, known as an 'unhosted wallet,' the crypto-asset service provider or other obliged entity should obtain and retain the required originator and beneficiary information from their customer, whether originator or beneficiary," the EU Commission's proposal text reads.
Non-custodial wallets do not rely on third parties and allow direct transactions between users. Examples of non-custodial wallets include MetaMask and hardware wallets like Ledger and Trezor.
Initially, the Commission proposed applying the rule to transactions worth over €1,000 ($1,106), but this "de minimis" rule has been scrapped under the cross-party parliamentary agreement, meaning all transactions would be in scope, Reuters reported.
Some prominent figures in the crypto industry already slammed the results, with Coinbase CEO Brian Armstrong stating that such a move "disproportionately punishes crypto holders and erodes their individual rights in deeply concerning ways."
Patrick Hansen, head of strategy for decentralized finance (DeFi) company Unstoppable Finance, called the text a "recipe for disaster" as it is only a matter of time when "these personal data honeypots will be hacked."
Here is a thread on the negative real-world consequences of these amendments. They are a recipe for disaster.
It is not a question of "if" these personal data honeypots will be hacked, but "when". https://t.co/bFxERcq9XJ
— Patrick Hansen (@paddi_hansen) March 31, 2022
Last month, the European Parliament's Committee on Economic and Monetary Affairs (ECON) passed the Markets in Crypto Assets Regulation (MiCA) legislative package, which aims to coordinate the EU's regulatory approach to the crypto industry.
As lawmakers stated at the time, one of the top priorities of the legislation is to ensure "that the EU financial services regulatory framework is innovation-friendly and does not pose obstacles to the application of new technologies."