EU revives Chat Control 1.0 with voluntary scanning and E2EE carve-out until 2028
The European Parliament has revived “Chat Control 1.0,” a temporary framework that would let technology firms voluntarily scan private communications for CSAM until 2028. The amended proposal now goes back to the Council of the EU for a formal response within three months.
A key change is an encryption carve-out. Lawmakers approved an amendment excluding communications protected by end-to-end encryption (E2EE), covering messages where E2EE is or will be applied. The stated aim is to reduce the risk that platforms read content during transmission.
However, critics argue the practical implementation could still enable device-level or client-side inspection, increasing privacy and security risks. Crypto and privacy groups warn that such scanning could expose sensitive wallet-related data (e.g., seed phrases, session keys, recovery information) and expand the attack surface if inspection tools gain broad access to users’ files.
The vote also raised concerns for open-source developers and the compliance burden on wallet and decentralized application teams. This temporary “Chat Control 1.0” is separate from the broader “Chat Control 2.0,” with renewed negotiations expected in September. In the meantime, the Council will decide whether the E2EE protections remain in the final rules.
For crypto traders, the near-term impact is mainly sentiment-driven. Expect pricing around “privacy vs encryption compliance” risk rather than any direct hit to network fundamentals, as regulators shape requirements for crypto-adjacent tech.
Neutral
This is unlikely to move the price of any single crypto asset directly in the short term, because the decision is focused on messaging compliance and implementation details rather than protocol or token-specific fundamentals. The market signal is instead about regulatory sentiment: the E2EE carve-out may reduce perceived risk, but the dispute over client-side or device-level “chat scanning” keeps privacy and security concerns in focus. Traders may react through risk premia for privacy-sensitive narratives and crypto infrastructure providers, especially around wallet and client software. Over the longer term, the upcoming Council review and the separate “Chat Control 2.0” negotiations (expected in September) can extend uncertainty about compliance scope, but until implementation specifics are clearer, the net price impact should remain limited.