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🟣 Is the EU Killing Crypto?

PLUS: L2s Are Heating Up

GM DOers! 😎

On Friday, the EU passed a law called the ‘Anti Money Laundering Regulation’ (AMLR) and the entire Crypto Twitter went into panic mode. 

The misunderstanding: Crypto media outlets started to report that the EU is looking to ban all anonymous crypto transactions via self-custody wallets.

But that’s far from the truth. Sure, crypto will be somewhat affected by this new law (which goes live in 2027) but it’s not as bad as everyone thought. 

I’ll let Patrick Hansen (Director of EU Strategy and Policy at Circle) tell us what this law is truly about. 

Once we do that, we’re taking a look at Ethereum L2s – the hottest sector in crypto right now. 

Let’s dive in.

Is the EU Killing Crypto?

First up, the EU's Anti Money Laundering Regulation (AMLR) is a wide-ranging rule aimed at preventing money laundering and terrorist financing, and it applies to both financial (i.e. banks, investment firms & insurance companies) and non-financial organizations (i.e. real estate agents, casinos and crypto exchanges). 

This isn’t a law targeted to crypto exclusively. In short, here’s what this law is about: 

  1. Cash payments have a limit of €10,000, but countries in the EU can choose to lower this limit.

  2. Identity checks (KYC) are mandatory if buying goods or services for over €1,000. 

  3. Anonymous cash payments over €3,000 are prohibited. 

As you can see, this law is more so about cash payments than crypto payments, in an attempt by the EU to kill cash. 

The main misinformation that was spread on Crypto Twitter over the weekend was that buying goods and services with a non-custodial wallet (i.e. Ledger or MetaMask) was banned. 

That’s not true! This law is only imposing centralized exchanges (i.e. Binance, Coinbase etc.) to have KYC standards in place before allowing users to transact on their platforms. 

This will also make it more difficult for users to pay with crypto using a non-KYC self-custody wallet. Not because transactions will be banned, but because the merchant won’t be able to take your payment. 

However, this is already common practice today. 

TL;DR: This law mostly reiterates existing rules for CASPs (Crypto-Asset Service Providers) like crypto exchanges without significantly impacting self-custody wallets, P2P transfers, or crypto payments.

One thing to note however is that this law specifically bans CASPs from offering anonymous accounts and transactions with privacy coins like Monero, so that’s not great news.

The AMLR law is about to be officially approved by the EU Parliament and Council and will start to apply around summer 2027, three years after it's published.

H/t. to Patrick Hansen for debunking all of this. Check his full thread here.

P.S. - This is a good reminder to not blindly trust Crypto Twitter, and especially don’t take the whale accounts on X as your main sources.

Ethereum Layer 2s Are Getting Hot 🔥

In the past month, the TVL (total value locked) on Ethereum L2s went from $30 to $38 billion, a ~26% growth. 🚀

Base is leading the way here, with a whopping 2.6x increase in TVL in the last month. 

At the same time, Arbitrum has seen a significant increase of 30% in TVL in the last month too. 

Part of the hype around L2s is coming from the successful implementation of EIP-4844, which reduced fees by an order of magnitude a few weeks ago. 

Fun fact: The chart below shows the cost of fees on Arbitrum. Down only. 📉

Another reason for the increase are memecoins, which have started to move from Solana to mainly Base, which has become the preferred ecosystem for degens. 

The leading memecoin on Base is $DEGEN, a token used for tipping other users on Farcaster – it sits at a $600 million fully diluted market cap today.

Source: DexScreener

Because of all the hype, users are flocking to Base right now. Check this incredible chart.

Source: Dune

It smells like Base Season.

However, if we zoom out, we can still see that Solana is still leading the way in interest. By far. 

Wrapping Up – More Ethereum Layer 2s Are Coming 👀

It’s probably just the start of Ethereum L2s having a moment. According to L2Beat, there are 34 L2s that are planning to launch soon. 

In addition, we have a bunch of existing L2s like Blast, Mode and Base that are already live, but don’t have a token yet. Check all the upcoming tokens here. 

My guess is that the interest in L2s will continue to rise in the coming few months. The reasons are obvious:

  • Low fees 

  • Airdrop farming opportunities

  • Narratives like memecoins popping up

On the investing side, I’m still pondering over where the opportunity really lies with L2s, and which tokens could be really good investments for this bull market and beyond. 

I still don’t have a succinct answer, but here’s a message I shared with PRO members in Discord about 2 weeks ago. Hope it helps. 

P.S. - If you’d like to get in on the action in Discord, then make sure you Go PRO and join us in the PRO-only channels. 

We’re always debating on where the investing opportunities are in crypto and I continuously share my thoughts on various things going on in the markets.

Would love to have you there.

Thanks for reading. And remember, you're strong, you’re powerful, you’re alpha!

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Disclaimer: This article is for informational purposes only and not financial advice. Conduct your own research and consult a financial advisor before making investment decisions or taking any action based on the content.

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