Confidentiality is workable so long as the regulated firm can identify the parties and disclose on demand. Encrypted amounts are not the thing being restricted.
What Netherlands actually says
The Netherlands ran the most aggressive self-hosted wallet identification demand in Europe and then gave it up, which makes it the most instructive European case in this section. Providers had to verify the address on every transfer to or from an external wallet, in practice by asking customers to photograph their wallet or sign a message. Worth being precise, because the headlines were not: the court did not annul the requirement. It gave the regulator six weeks to justify it properly. The regulator then accepted the challenge was well founded, revoked the requirement and stopped collecting screenshots. A supervisor reversing itself on proportionality grounds is rare enough to be worth citing wherever the unhosted wallet question comes up.
The instruments that matter
- The central bank's address verification requirement
- providers had to verify the wallet address on every transaction to or from an external wallet, in practice by collecting a customer screenshot or a signature over the receiving address
- Challenged as disproportionate
- the exchange argued the requirement had no technical merit and violated customer privacy, putting its complaints to the court in March 2021
- The court did not strike it down
- the judge gave the central bank six weeks to review and re-justify its address verification policy rather than annulling it
- The regulator then withdrew it
- the central bank accepted the challenge was right, revoked the requirement and stopped asking for wallet screenshots
What this means for confidential transactions
Bubble is built for exactly this shape of obligation: amounts and balances live on chain as ciphertexts, computation happens without decryption, and the only disclosure path is an on-chain access list through which an authorized party - an auditor, a supervisor, a counterparty - can request scoped decryption. That is confidentiality from the public, not from the regulator.
Related entries
- EU Transfer of Funds RegulationEurope · Travel rule · Regulation (EU) 2023/1113
- AustriaEurope · EU baseline, with an early transition close
- BelgiumEurope · EU baseline, with no national layer on confidentiality
- CzechiaEurope · EU baseline, supervised by the central bank
- DenmarkEurope · EU baseline, with tax as the historic pressure point
- EstoniaEurope · The licence cull that reshaped the European market
Compliant by default.
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