Understanding Hosted and Self-Hosted Wallets in Crypto Transactions

Jake Chervinsky, general counsel at Compound Labs, and Kristin Smith, executive director of The Blockchain Association, talk about the storm brewing in the cryptosphere involving self-custody and privacy. In this episode, they cover:

• the differences between hosted and self-hosted wallets and how transactions between them differ
• why the ability to transact from self-hosted wallets is so important
• compliance and regulation in the traditional financial world and how it could affect self-custody
• the “Swiss rule” and what it could mean for the rest of the world
• the proposal by FinCEN to lower the threshold for collecting data on transactions from $3,000 to $250
• how regulators might achieve their goals without “dragnet” surveillance
• how the amount of crime and money laundering in the traditional financial system compares to that in the crypto world
• why OTC brokers are considered the most significant money laundering risk in crypto, and how that risk might be mitigated
• how different political environments can influence the value of peer to peer transactions
• whether Americans should be willing to give up some of their financial privacy in favor of security
• what the recent statement by the DOJ's cryptocurrency enforcement framework labeling anonymous transactions as "high-risk activity indicative of possible criminal conduct" could mean for privacy coins like Monero and Zcash
• Gary Gensler's appointment as head of Biden's financial policy transition team and whether to view it as a positive or negative for crypto
• whether they think the incoming Congress will be in favor of more surveillance or more privacy
• whether there might eventually be regulations for developers who write code for self-hosted wallets
• how potential rules regarding self-custody could affect non-monetary items like NFTs
• and the next big developments they are watching out for regarding this issue

Thank you to our sponsor! 

Crypto.com: http://crypto.com

Episode links: 

Jake Chervinsky: https://twitter.com/jchervinsky

Compound Labs: https://compound.finance

Kristin Smith: https://twitter.com/kmsmithdc

The Blockchain Association: https://theblockchainassociation.org/

https://twitter.com/BlockchainAssn

FinCen NPRM: https://www.federalregister.gov/documents/2020/10/27/2020-23756/threshold-for-the-requirement-to-collect-retain-and-transmit-information-on-funds-transfers-and

Coin Center commentary on lowering FinCEN threshold: https://www.coincenter.org/app/uploads/2020/10/Coin-Center-Comment-FinCEN-FRB-250-threshold.pdf 

Unchained episode about the FATF travel rule: https://unchainedpodcast.com/why-the-travel-rule-is-one-of-the-most-significant-regulations-in-crypto/ 

The choice of Gary Gensler to lead the financial policy transition team: 

https://www.wsj.com/livecoverage/trump-biden-election-day-2020/card/peMRHGPJasECSPLezSFx

https://www.coindesk.com/biden-confirms-gary-gensler-will-lead-financial-policy-transition-team

Shapeshift delists Zcash: https://www.coindesk.com/shapeshift-delists-privacy-coin-zcash-over-regulatory-concerns

Jessie Liu interview on Unchained: https://unchainedpodcast.com/what-you-need-to-know-about-the-dojs-cryptocurrency-enforcement-framework/

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