Coinbase CEO Brian Armstrong is warning crypto asset owners about legislation cracking down on self-hosted crypto wallets that may be hastily introduced in the Trump administration’s final days.
Armstrong took to Twitter to alert his 376,000 followers that there are rumblings of a new crypto-targeted legislation in Washington.
“Last week we heard rumors that the US Treasury and Secretary Mnuchin were planning to rush out some new regulation regarding self-hosted crypto wallets before the end of his term. I’m concerned that this would have unintended side effects, and wanted to share those concerns.”
Self-hosted crypto wallets, also known as non-custodial wallets or self-custody wallets, allow crypto asset holders to protect and house their crypto independently and without the oversight of a custodian such as Coinbase.
The CEO suspects that the new legislation would require financial institutions like Coinbase to verify the identity of any self-hosted wallet owner receiving crypto assets.
Though this may seem like a reasonable measure, Armstrong stresses that it can be difficult and impractical to collect identifying information from recipients in the cryptoeconomy.
Armstrong points out that crypto assets serve a wide range of purposes across the web and many of those functions would be greatly hindered by the possible legislation. In some cases crypto is sent to smart contracts in order to use decentralized finance (DeFi) apps, which are not always owned by an identifiable individual or business, says Armstrong.
In addition, the new policy could inhibit an individual’s ability to buy goods with crypto online and to send crypto assets to emerging markets.
“Many crypto users are sending crypto to various merchants online, paying for goods and services. Does it make sense to require customers to help verify the identity of a business before they can buy a product there?
Many crypto users are also sending crypto to people in emerging markets, where it is difficult or impossible to collect meaningful “know your customer” information. Some of these individuals are living in poverty, and may not have any permanent address or form of government ID.”
Armstrong believes that any legislation that resembles what he thinks may be brewing in Washington could hinder the growth of the crypto-ecosystem and threaten user access to crucial financial systems.
“If this crypto regulation comes out, it would be a terrible legacy and have long standing negative impacts for the U.S. In the early days of the internet there were people who called for it to be regulated like the phone companies. Thank goodness they didn’t.”