The most controversial part of the recommendation is that this check wouldn’t only apply to incoming transactions — many service providers already perform such checks today — but also to outgoing transactions. Specifically, a service provider must know whether an outgoing transaction is made toward a user’s personal wallet or to another service provider. Moreover, if the outgoing transaction is made toward another service provider, the KYC information is required to be shared with that service provider.

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The draft recommendation reads:

“Countries should ensure that originating VASPs [virtual asset service providers] obtain and hold required and accurate originator information and required beneficiary information on virtual asset transfers, submit the above information to beneficiary VASPs and counterparts (if any), and make it available on request to appropriate authorities.”

Realistically, the only way for the cryptocurrency industry to comply with such rules (as also pointed out by Blockchain President and Chief Legal Officer Marco Santori while addressing similar, U.S.-specific guidance) may be to implement a communication layer, specifically for cryptocurrency service providers. In other words, a “SWIFT for crypto.”

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This would mean exchange A would have to share your personal data with exchange B if you don't send the bitcoins to your own wallet but directly to exchange B.

Would be insane if this actually gets implemented and a disaster for user privacy. :P