Crypto lobby defends self-hosted wallets and P2P from rumored gov't crackdown

Published on by Cointele | Published on

Major players in U.S. crypto lobbying are coming out in defense of noncustodial wallets.

On Tuesday, the Blockchain Association released a new report presenting policy options for self-hosted wallets to regulators.

On Wednesday, Coin Center published an expert view by Jai Ramaswamy, also defending such wallets.

The Blockchain Association is a trade organization for the crypto industry, while Coin Center is a nonprofit focused on defending decentralization before policymakers.

His piece focused on the role of the Bank Secrecy Act in crypto and increased regulatory anxiety over decentralized finance and peer-to-peer transactions.

"Because non-compliant entities that are already subject to the global AML/CFT regime - namely non-compliant OTC brokerages and exchanges - represent the greatest 'hole' in the AML/CFT regime in the digital asset ecosystem, additional restrictions on self-hosted wallets would not address the substantially greater risk posed by non-compliant VASPs."

Miller Whitehouse-Levine, the association's policy manager, told Cointelegraph: "Limiting peer-to-peer transactions would require changes to underlying protocols." Executive director Kristin Smith followed up, saying "The fear is that the only way to implement them will be to cut off transactions to and from self-hosted wallets and hosted wallets."

There are no active policy proposals taking aim at unhosted wallets, but rumors have circulated for some time regarding plans to demand the sort of "Whitelisting" that Smith mentioned.

Such a scheme would only allow crypto exchanges to interact with wallet addresses that come from other approved and regulated sources, leaving self-hosted wallet addresses out in the cold.

FinCEN recently made waves by releasing plans to reduce its reporting standards for international transactions from its longstanding threshold of $3,000 down to $250. They have also played a role in a growing list of recent enforcement actions against crypto firms.