Coinbase’s CEO Brian Armstrong has sent a letter to the US Treasury Secretary Steven Mnuchin regarding new rumored regulations on self-hosted cryptocurrency wallets. Armstrong believes that if implemented, the new legislation could harm users and, ultimately, the role of the US in the cryptocurrency financial field.
New Regulations On Self-Hosted Crypto Wallets?
The CEO of the largest US-based digital asset exchange took it to Twitter to outline the potential importance of these regulations if indeed implemented. The rumors indicate that the current Treasury Secretary Mnuchin plans to make them official before the end of his term.
Armstrong explained that self-hosted cryptocurrency wallets (also referred to as non-custodial or self-custody wallets) are “a type of software that lets individuals store and use their own cryptocurrency, instead of needing to rely on a third-party financial institution.”
They enable users to access basic financial services through this technology – “just like anyone can use a computer or smartphone to access the open market.”
Should the proposed regulations become official, they would require financial institutions, including Coinbase, to verify the recipient (owner) of the self-hosted wallet. Meaning, it would collect identifying information on that party before completing the transaction.
According to Armstrong, such requirements would lead to several potential issues because “it is often impractical to collect identifying information on a recipient in the crypto-economy.”
Some of those issues could affect users that send cryptocurrencies to various merchants online or to other people in emerging markets, where “it is difficult or impossible to collect meaningful know-your-customer information.”
Even simpler transactions like upvoting some content on Reddit or transferring an item in a game would also require the verification of the recipient, which makes the process prolonged and complicated.
The US Will Suffer The Most
Armstrong believes that the impact of these “barriers” would prompt US-based users to initiate fewer transactions. This would “effectively create a walled garden for crypto financial services in the US, cutting us from innovation happening in the rest of the world.”
US customers would turn to foreign cryptocurrency companies to access such services, which could put the country’s status as a financial hub at risk in the long-run.
“If this crypto regulation comes out, it would be a terrible legacy and have long-standing negative impacts for the US. In the early days of the internet, there were people who called for it to be regulated like to phone companies. Thank goodness they didn’t.” – added Armstrong.
He also asserted that Coinbase and other cryptocurrency companies have sent a letter to the Treasury last week to articulate these concerns. However, he hasn’t specified if the Treasury has responded in any way yet.