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Prior to the transfer of power, the U.S. Treasury could hastily pass a law affecting assets held on wallets in self-custody. Officially, this would be to combat illegal uses of cryptocurrencies.
This is a prospect that promises to meet with very strong opposition. While the Trump administration will have to step down next January, the Secretary of the Treasury intends to take advantage of this reprieve.
With only a few weeks to go before he is due to step down, Steven Mnuchin is pushing for a law to regulate electronic wallets. The legislation targets more specifically self-custody wallets, i.e. wallets held directly by users.
Officially, it would be a matter for the authorities to fight against illegal transactions, by collecting data on the owners of these wallets. A godsend for the advocates of centralized finance? Not at all.
“This proposed regulation would, in our view, require financial institutions like Coinbase to verify the recipient/owner of the self-hosted wallet, by collecting identifying information about that party, before a withdrawal can be sent to that self-hosted wallet,” warns Coinbase CEO Brian Armstrong.
Such a scenario is already being hotly contested. These rules would force companies in the crypto world to know the recipients of their users’ transactions. They would therefore have to keep records, track movements and verify identities before any transfer.
Unthinkable for the industry. Such a policy would not only have consequences for exchanges and wallet providers such as Trezor or Ledger. It will also be a blow for services based on non-custodial wallets. This is particularly the case for decentralized finance (DeFi).
“These additional frictions would kill off many of the emerging crypto use cases. Crypto isn’t just about money – it scans all kinds of goods,” Armstrong warns.
And these concerns must be taken seriously, according to Ouroboros LLP’s blockchain specialist Jacob Farber. “Imposing a KYC requirement on on/off ramps and every portfolio that trades exponentially extends the reach of crypto regulation,” he told CoinDesk.
Officially, the U.S. Treasury is not making any regulatory announcements. Simple rumor then? For the crypto industry, it is in any case a matter of sounding the alarm and mobilizing public opinion to prevent such a scenario.