21st June 2022 > > UK regulation.

tl;dr

The UK is being sensible about regulation around self-custodial wallets.

Market Snap (at time of writing)

Market Wrap

Italian 10-year yields have tightened to 200bps spread to 10-year bunds from 250bps late last week, providing some measure of relief from the risk of re-running the sovereign debt crisis of 2012.

The ECB has promised a plan that Deutsche Bank’s Jim Reid has called “quantitative tightening on the core and quantitative easing on the periphery”.

We must hope that the ECB will be as successful this time as when Mario Draghi famously declared “we will do whatever it takes”, single handedly preventing an implosion of peripheral debt markets.

Curious Cryptos’ Commentary – Regulation around self-custodial wallets

Self-custodial wallets can be hardware wallets – Ledger Nano X for instance – or software wallets like MetaMask.

Though they all suffer some security issues (specifically the best and most confidential way to store your private keys) they are inherently more secure than leaving your crypto assets on a centralised exchange (CEX), such as Coinbase.

My rule of thumb is to never keep more than 10% of my total crypto assets, and usually much less than that, across all the CEX that I use.

Earlier this year, the EU Parliament voted to impose KYC (Know Your Customer) rules on private, self-custodial wallets. In effect, this regulation puts the onus on each and every CEX to collect personally identifiable information from individuals for any transaction between the CEX and a self-custodial wallet of over EUR 1,000.

Justified as a means to prevent use of illicitly gained cryptos, this is exactly the type of draconian and controlling regulation that inhibits the development of crypto business. Brian Armstrong, CEO of Coinbase, was unsurprisingly critical of this measure:

“This means before you can send or receive crypto from a self-hosted wallet, Coinbase will be required to collect, store, and verify information on the other party, which is a not (sic) our customer, before the transfer is allowed.”

He continued with this comment:

“This eviscerates all of the EU’s work to be a global leader in privacy law and policy. It also disproportionately punishes crypto holders and erodes their individual rights in deeply concerning ways. It's bad policy.”

In stark contrast the UK has decided to drop this legislation from its own regulatory plans.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1083351/MLRs_SI_2022_-_Consultation_Response_final.pdf

This document states that:

“Instead of requiring the collection of beneficiary and originator information for all unhosted wallet transfers, crypto asset businesses will only be expected to collect this information for transactions identified as posing an elevated risk of illicit finance.”

The rumbling sound in the distance is that of vast amounts of crypto tax dollars leaving Europe and heading our way.