The use of “self-hosted” (non-custodial) wallets is in question around the world, with monitoring initiatives at the European level in particular. But not in the United States, where legislation has just been passed to protect consumers’ right to dispose of their digital assets. What does this mean for
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Supervision of self-hosted wallets in question worldwide
To understand why this is important, we first need to look to Europe. As a reminder, the European Union had envisaged total oversight of self-hosted wallets, i.e. wallets that do not depend on an external centralized entity to operate, like Ledger or MetaMask for example.
The MiCA law and the Travel Rule have finally ruled on the use of these wallets. As part of the fight against money laundering and the financing of terrorism (AML/CFT), transfers between self-hosted wallets and centralized entities will be systematically monitored:
“The issuing platform will have to transmit to the receiving platform the full name, address, date and place of birth, transaction amount and destination, as well as the customer’s account number. “
Self-hosted wallets are by nature less controllable than those that rely on a centralized entity, which has control over the addresses. This is why they are particularly targeted by regulators.
Protecting self-hosted wallets in the U.S.
In the United States, however, a law has just gone against these latest trends. It was proposed by Congressman Warren Davidson, who has already made cryptocurrencies a campaign issue. He passed a bill protecting Americans’ right to use self-hosted wallets. Dubbed “Keep Your Coins”, it aims to guarantee a degree of anonymity for users:
Last night, the @FinancialCmte passed my bill to protect self-custody. Those attacking self-custody oppose individual freedom. They want someone they control to control your assets.
Defend Freedom.KeepYourCoins https://t.co/MMUtosy6Qm
– Warren Davidson (@WarrenDavidson) July 28, 2023
“Those who attack the right to retain assets are opposed to individual liberties. They want to control an entity that will in turn control your assets. “
The law thus specifies that a federal agency head will not be able to “prohibit, restrict, or otherwise impede a user’s ability to use convertible virtual currencies […] or the hosting on his or her behalf of digital assets using a self-hosted wallet or other means of conducting transactions.”
The act is symbolic, as the US government has not at this stage banned the use of such wallets. But this guarantee is important for the American ecosystem, which has come under numerous attacks from regulators in recent months. This morning, for example, we learned that the SEC was preparing a major new attack on Coinbase, deeming all cryptocurrencies except Bitcoin (BTC) to be “securities”.
The war between anti- and pro-cryptos is thus intensifying in the USA, at a time when Sam Bankman-Fried’s links with the Democratic Party are a thorn in the side of the government. Who will win, the SEC or its opponents? Answer in the coming months.
