Coinbase CEO Brian Armstrong has raised an alarm concerning speculation about the US government proposing strict crypto wallet regulations. Friction occasioned by more broad-based know your customer (KYC) compliance has seen industry stakeholders accusing government agencies of encroaching on individual privacy rights.
KYC on Non-custodial Crypto Wallets
Tweeting on Thursday (Nov. 26, 2020), the Coinbase chief revealed that US Treasury Secretary Steve Mnuchin was planning to introduce regulations targeting non-custodial crypto wallets. Speculating on the nature of the rumored regulatory action, Armstrong predicted that the US government will be looking to mandate KYC compliance for self-custody wallet owners.
Based on Armstrong’s tweet, such a policy could mean US crypto exchanges will be forced to demand personal details from their customers with self-hosted wallets before allowing withdrawals from their platforms. For Armstrong, the move could constitute an infringement on the privacy rights of many crypto owners Stateside.
Explaining further, Armstrong declared that many US crypto owners will simply elect not to provide any more identifying documents. Several platforms have suffered malicious data breaches that have compromised user data stored on cryptocurrency exchanges.
Commenting on the potential dangers of such a policy move, the Coinbase CEO opined:
“Given these barriers, we’re likely to see fewer transactions from crypto financial institutions to self-hosted wallets. This would effectively create a walled garden for crypto financial services in the U.S., cutting us off from innovation happening in the rest of the world.”
For Andreessen Horowitz general partner and former Coinbase CTO Balaji Srinivasan, the move will constitute an act of financial disenfranchisement. According to Srinivasan, the policy will be detrimental to people without IDs while serving to expand the scope of government financial surveillance.
Stringent US Crypto Regulations
As previously reported by BTCManager, Coinbase has already been forced into disabling margin trading on account of regulatory concerns. Binance, another major crypto exchange recently informed its American customers that they had less than a fortnight to migrate to the platform’s US service.
Strict regulations in the US have seen some crypto exchanges geofence certain altcoins to prevent running afoul of securities laws. Critics say these restrictive policies are stifling the growth of the industry in the country.
Apart from restrictive mandates, the US is also plagued by a patchwork of State and Federal regulations that make it difficult for companies to passport their services across the country.