Leaked EU Docs Warn Members to Clamp Down on Crypto Mixers

Blockworks exclusive: A final draft of incoming EU regulation reveals bloc regulators are increasingly concerned about crypto privacy

article-image

Charles Michel, president of the European Council; Source: Annika Haas (EU2017EE), CC BY 2.0

share

key takeaways

  • EU regulators are warning member states that the European Banking Authority will clamp down on crypto mixers and other privacy-preserving technologies
  • Crypto asset service providers would be required to strictly monitor crypto tied to “self-hosted wallets”

The European Union (EU) is preparing to warn its 27 member states of pending amped-up scrutiny of technologies that power anonymous transactions, such as crypto mixers and privacy wallets.

In a final draft for amendments to EU regulation 2015/847 obtained by Blockworks, the governing body outlines pending changes to rules dictating how member states should police the digital asset sector.

The document mostly relates to crypto asset service providers (CASPs) — such as exchanges, wallets and staking platforms — and the steps they must take to stamp out money laundering and other illicit activity in line with Financial Action Task Force directives.

Incoming stipulations tied to how EU member states must enforce the so-called “travel rule” are known — crypto entities must log detailed information on users who transact 1,000 EUR ($998) or more in digital assets per year. Know-your-customer requirements include obtaining names, addresses, countries of origin and serial numbers from passports.

Transfers involving unique digital assets, such as NFTs, should be exempt — unless specifically detailed in the incoming Markets in Crypto-Assets (MiCA) regulation.

EU financial watchdog still after ‘self-hosted’ crypto wallets

Whether these demands extend to crypto wallets not under the auspices of exchanges has been a sticking point for the EU — and a matter of contention worldwide. 

Previous drafts of the regulation listed transfers involving products and technologies “designed to enhance anonymity, including mixers or tumblers” as “high-risk factors of money-laundering, terrorist finance and other criminal activities.”

The final draft, however, says the European Banking Authority — the EU’s primary financial regulator — “shall pay particular attention to products, transactions and technologies that may favor anonymity such as privacy wallets, mixers or tumblers.”

The new move is especially pertinent considering the US Treasury’s sanctioning of Tornado Cash earlier this year. Protocol developer Alexey Pertsev is reportedly set to remain in Dutch jail until at least November after his appeal was denied.

Excerpt from the final draft

In the latest draft, dated Sept. 30, regulators said CASPs “should in principle not be required to verify the information on the user of the self-hosted address.”

“Nonetheless, in case of a transfer whose amount exceeds 1,000 EUR and is sent or received on behalf of a customer of a crypto-asset service provider to or from a self-hosted address, that crypto-asset service provider should verify whether such self-hosted address is effectively owned or controlled by that customer,” the draft states.

Even so, the final draft contains fresh clauses. In situations of higher risk — like interacting with self-hosted wallets — CASPs should consider applying due diligence measures,  including identifying counterparties in a given crypto transaction.

Excerpt from the final draft

The wording would likely require CASPs to gather additional information about where the cryptocurrencies were obtained and be subject to further monitoring.

Representatives for the EU and the European Banking Authority did not immediately return requests for comment. 

The complete updated set of regulations will come into force 20 days after its publication in the Official Journal of the European Union. Before that happens, the European Council and Parliament must agree to ratify the proposal within three separate readings, with adjustments possible in between. 

The process lasts on average 24 to 31 months, with this particular proposal document first drafted last year.


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Research Report Templates (3).png

Research

Pear Protocol has proven its market fit through its pair-trading infrastructure, sustaining consistent trading activity despite recent headwinds. Its strategic pivot toward Hyperliquid integration represents a major growth catalyst amid industry consolidation. While short-term token unlocks present challenges, current valuations and liquidity conditions may offer compelling opportunities for investors.

article-image

As the Trump administration continues to test Fed independence, markets are beginning to react

article-image

An Aave interest rate shock prompted over 475,000 validators to exit and pushed stETH into a prolonged depeg

article-image

While Roman Storm’s team is set to present its case, it’s not yet clear if the Tornado Cash founder will testify

article-image

A wireless network inspired by lost drones is now helping telco carriers reach your phone indoors

article-image

The ETH products have notched $3.6 billion of net inflows from July 1 to July 22, Farside Investors data shows

article-image

With these levies, it’s cheaper for Japanese manufacturers to send cars to the US than it is for domestic makers to import parts from other countries