For centuries, self-conservation has symbolized financial autonomy, allowing people to acquire their wealth – from gold to silver – without intermediaries. Bitcoin extends this principle into the digital realm, offering a decentralized way to hold assets that resists censorship. However, upcoming European regulations under the Markets in Crypto Assets Regulation (MiCA) and the Fund Transfer Regulation (TFR) threaten to make self-preservation more difficult for Bitcoin users.
A new era of governance
MiCA, adopted in April 2023, aims to fully regulate crypto assets in the EU. The revised TFR applies the “Travel Rule” to Bitcoin transactions, requiring detailed information from the sender and recipient for compliance. These changes will take effect in 2025, making it more difficult for Europeans to interact with self-storage Bitcoin wallets without cryptographic proof of ownership.
One proposed solution is the “Satoshi Test,” where users verify ownership of wallets by sending a small amount of Bitcoin (eg, one satoshi) from their wallet to the exchange. While simple for existing holders, this process creates a paradox for new users: they need Bitcoin to prove ownership but can't get Bitcoin without going passed the test. This “catch-22” risks producing new adopters, driving them towards conservative solutions that undermine Bitcoin's philosophy of decentralization and financial sovereignty.
Privacy and security risks
In an effort to comply with the new rules, some exchanges are exploring alternatives to the Satoshi Test; These include using end-to-end encrypted messages signed using the private key to cryptographically verify ownership of the wallet for example through the WalletConnect Network. This preserves privacy and still helps institutions to comply.
The main philosophy of Bitcoin technology and cryptocurrencies is decentralization and privacy. Centralizing sensitive user data not only creates attractive targets for cybercriminals but also goes against the principles that have driven the adoption of cryptocurrencies. The recent history of data breaches in the financial sector highlights the dangers of storing large amounts of personal data in centralized stores.
“Not your keys, not your coins”
The adage “Not your keys, not your coins” is a reminder of Bitcoin's main philosophy: control of private keys equals control of assets. Users must carefully evaluate the self-storage support of exchanges, as cumbersome processes or centralized data storage undermine Bitcoin's promise of financial freedom.
The TFR is just the beginning. Future legislation, such as the proposed Payment Services Directive 3 (PSD3), indicates increasing regulatory scrutiny of Bitcoin's self-sustainability. To preserve the core values of Bitcoin, the industry must develop solutions that comply with regulations and at the same time protect the privacy of users.
This is a very important time for Bitcoin in Europe. Users should apply for exchanges that prioritize self-preservation and privacy protection measures. Exchanges, in turn, must innovate to comply with regulations while remaining true to Bitcoin's decentralized principles.
As Europe tightens its regulatory framework, the choices made by Bitcoin users, exchanges and regulators will determine whether Bitcoin continues to empower individuals or become entrenched in centralized systems. . By promoting privacy and self-preservation, we can ensure that Bitcoin remains a tool for financial sovereignty and freedom.
This is a guest post by Jess Houlgrave. Their views are entirely theirs and do not necessarily reflect the views of BTC Inc or Bitcoin Magazine.
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