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- Cardano inventor Charles Hoskinson reacted to Coinbase’s CEO Armstrong about the introduction of new regulation for crypto wallets in the US.
- Hoskinson proposes decentralized identity documents to allow users to have decision power over their data.
In the midst of a transition of power in the United States, the crypto industry could take a hit. At least, this is what Coinbase CEO Brian Armstrong thinks about the rumors of new regulation towards crypto wallets. Cardano‘s inventor, Charles Hoskinson, has proposed a solution.
Via Twitter Armstrong explained that current Treasury Secretary Steve Mnuchin is accelerating the introduction of a regulation that would require entities like Coinbase to learn more about their customers. Specifically, the purported new regulation would target users of self-custodial crypto wallets.
These kinds of wallets are software that allows their users to have full control over their coins, private keys and in some cases, even allow users to do coin management. That way, users can do self-custody of their Bitcoin, Ethereum, Litecoin, or any other cryptocurrency they choose and access financial services, decentralized applications, and make transactions.
Armstrong explained that if the regulation that the Secretary of the Treasury intends to pass is approved, Coinbase and the other exchanges will have to verify whether or not users are using a self-custody wallet. In addition, they must ask their customers for information each time they attempt to make a withdrawal.
As Armstrong explained, the process presents many obstacles and drawbacks for users and for exchanges. In some cases, funds are sent to a smart contract that does not have an identity or cannot be classified as the owner of the funds it receives. Therefore, this case does not seem to be covered by the regulations.
In other cases, a user may try to send funds to a developing country. There, it is difficult for people to gain access to identity documents, proof of address, or means of verifying their identity with a Know Your Client process, even if they wanted to. Other users, Coinbase’s CEO said, may simply not want to share more information.
This would have negative consequences for the crypto industry. The country is at risk of isolating itself from the innovation that occurs in this sector and could cause its citizens to use foreign solutions, as Armstrong said:
This would be bad for America because it would force U.S. consumers to use foreign unregulated crypto companies to get access to these services. And long term, I believe this would put America’s status as a financial hub at risk (…). If this crypto regulation comes out, it would be a terrible legacy and have long standing negative impacts for the U.S.
Cardano offers a decentralized identity solution
In that sense, the inventor of Cardano responded that the “regulations are moving there”. In other words, Hoskinson believes that regulators may intend to limit users’ options for accessing greater privacy and may force them to disclose more information by prohibiting technology such as self-custody wallets. IOHK’s CEO said:
Now people are getting why we invested so much into Prism and where regulation is moving. Governments want identity and value to be linked and the lawful use of these systems will require users at some point to do so. Best own your own data and identity
Atala Prism is a decentralized identity (DID) solution that will allow users to manage their own data and issue credentials. That way, addresses in a wallet could be authenticated by users who would have complete control over their data. However, this seems to be a partial or no solution for users who defend their right not to share data with governments or regulatory institutions.
