June 11, 2024

The Battle For Bitcoin Self Custody: Financial Freedom Under Threat

Self custody of digital assets protects consumers and eliminates the potential for fraud, negligence, and regulatory failure. Regulators should recognize this benefit.

Dave Birnbaum
Dave Birnbaum

Director of Product

The Battle For Bitcoin Self Custody: Financial Freedom Under Threat

Table of contents

The Battle For Bitcoin Self Custody: Financial Freedom Under Threat

This article was originally published on forbes.com.

In recent weeks, the cryptocurrency industry has faced a barrage of regulatory and law enforcement actions that threaten the fundamental right of Americans to hold their digital assets in self custody. The U.S. Attorney's Office in the Southern District of New York charged the co-founders of Samourai, a bitcoin mixing technology and service, with conspiracy to commit money laundering and operate an unlicensed money transmitting business.

Similarly, the Department of Justice levied charges against the developers of Tornado Cash, an open-source cryptocurrency privacy tool. The Securities and Exchange Commission (SEC) also sent a Wells notice to Consensys, claiming that its popular cryptocurrency wallet, MetaMask, violates securities laws.

These actions have sent shockwaves through the bitcoin community. After all, self custody has emerged as a critical tool for consumer protection. By holding their private keys, bitcoin users can mitigate the risks associated with entrusting their funds to third parties, such as exchanges or custodians.

Self custody eliminates the potential for fraud, negligence, or regulatory failure that can occur when a counterparty controls a person’s funds. In recent years, regulators have been unable to prevent large-scale fraud and money laundering in the cryptocurrency industry. The most stark example of this was the failure to catch the brazen fraud committed by FTX, all while the disgraced company positioned itself as the second largest donor to the Democrat party. In this environment, self custody has become a necessary safeguard for consumers.

The importance of self custody has not gone unnoticed by lawmakers and presidential candidates alike. Senator Cynthia Lummis has voiced her deep concern over the Department of Justice's "hyper-aggressive argument" that non-custodial software can constitute a money transmission service. She argues that this stance contradicts existing Treasury guidance and threatens the fundamental right to private property at the core of American liberty.

During his presidential campaign, Robert F. Kennedy, Jr., declared that Americans have a right to hold their own private keys, recognizing self custody as a crucial component of financial freedom. With digital assets now owned by a substantial percentage of the U.S. population, self custody has emerged as a political flashpoint just in time for the 2024 election.

Although digital assets are relatively new, this battle echoes the one fought between the federal government and privacy advocates in the 1990s. During that time, encrypted communications were a new technology, and the government sought to require private keys to be held by custodians. They argued that uncrackable digital messaging was too dangerous to be allowed to be used by everyday Americans since citizens could theoretically use private communications to undermine national security.

In hindsight, it is clear that the government's arguments were misguided and ultimately incompatible with a free society that values privacy and free speech. Today, Americans use encrypted communications daily as they communicate with others on iMessage, WhatsApp, Signal, and similar apps.

The outcome of the PGP wars demonstrated that individuals have the right to secure their communications and information without government intervention.

As the fight over self custody unfolds, we face two potential outcomes. The first is that, like the PGP wars, the community will prevail, and the right to self-custody will be recognized as a fundamental freedom. This outcome would ensure that consumers can protect their assets and maintain financial privacy without undue interference from regulators. The second, more ominous outcome is that we lose our freedoms as citizens, and the nascent bitcoin industry is forced to relocate to jurisdictions that are more welcoming to financial innovation.

The stakes in this battle are high. If regulators succeed in their efforts to restrict or ban self custody, they will not only expose consumers to unnecessary risks but also undermine the financial freedom and privacy that make bitcoin so appealing to millions of people across the planet. It is crucial that the cryptocurrency community, lawmakers, and the public at large recognize the importance of self custody and fight to protect this fundamental right. The future of financial freedom hangs in the balance.

May 1, 2024

The Battle For Bitcoin Self Custody: Financial Freedom Under Threat

Self custody of digital assets protects consumers and eliminates the potential for fraud, negligence, and regulatory failure. Regulators should recognize this benefit.

Dave Birnbaum
Dave Birnbaum

Director of Product

The Battle For Bitcoin Self Custody: Financial Freedom Under Threat

This article was originally published on forbes.com.

In recent weeks, the cryptocurrency industry has faced a barrage of regulatory and law enforcement actions that threaten the fundamental right of Americans to hold their digital assets in self custody. The U.S. Attorney's Office in the Southern District of New York charged the co-founders of Samourai, a bitcoin mixing technology and service, with conspiracy to commit money laundering and operate an unlicensed money transmitting business.

Similarly, the Department of Justice levied charges against the developers of Tornado Cash, an open-source cryptocurrency privacy tool. The Securities and Exchange Commission (SEC) also sent a Wells notice to Consensys, claiming that its popular cryptocurrency wallet, MetaMask, violates securities laws.

These actions have sent shockwaves through the bitcoin community. After all, self custody has emerged as a critical tool for consumer protection. By holding their private keys, bitcoin users can mitigate the risks associated with entrusting their funds to third parties, such as exchanges or custodians.

Self custody eliminates the potential for fraud, negligence, or regulatory failure that can occur when a counterparty controls a person’s funds. In recent years, regulators have been unable to prevent large-scale fraud and money laundering in the cryptocurrency industry. The most stark example of this was the failure to catch the brazen fraud committed by FTX, all while the disgraced company positioned itself as the second largest donor to the Democrat party. In this environment, self custody has become a necessary safeguard for consumers.

The importance of self custody has not gone unnoticed by lawmakers and presidential candidates alike. Senator Cynthia Lummis has voiced her deep concern over the Department of Justice's "hyper-aggressive argument" that non-custodial software can constitute a money transmission service. She argues that this stance contradicts existing Treasury guidance and threatens the fundamental right to private property at the core of American liberty.

During his presidential campaign, Robert F. Kennedy, Jr., declared that Americans have a right to hold their own private keys, recognizing self custody as a crucial component of financial freedom. With digital assets now owned by a substantial percentage of the U.S. population, self custody has emerged as a political flashpoint just in time for the 2024 election.

Although digital assets are relatively new, this battle echoes the one fought between the federal government and privacy advocates in the 1990s. During that time, encrypted communications were a new technology, and the government sought to require private keys to be held by custodians. They argued that uncrackable digital messaging was too dangerous to be allowed to be used by everyday Americans since citizens could theoretically use private communications to undermine national security.

In hindsight, it is clear that the government's arguments were misguided and ultimately incompatible with a free society that values privacy and free speech. Today, Americans use encrypted communications daily as they communicate with others on iMessage, WhatsApp, Signal, and similar apps.

The outcome of the PGP wars demonstrated that individuals have the right to secure their communications and information without government intervention.

As the fight over self custody unfolds, we face two potential outcomes. The first is that, like the PGP wars, the community will prevail, and the right to self-custody will be recognized as a fundamental freedom. This outcome would ensure that consumers can protect their assets and maintain financial privacy without undue interference from regulators. The second, more ominous outcome is that we lose our freedoms as citizens, and the nascent bitcoin industry is forced to relocate to jurisdictions that are more welcoming to financial innovation.

The stakes in this battle are high. If regulators succeed in their efforts to restrict or ban self custody, they will not only expose consumers to unnecessary risks but also undermine the financial freedom and privacy that make bitcoin so appealing to millions of people across the planet. It is crucial that the cryptocurrency community, lawmakers, and the public at large recognize the importance of self custody and fight to protect this fundamental right. The future of financial freedom hangs in the balance.

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