The US Treasury Department has declared that all Bitcoin and ”cryptocurrency” exchanges in the United States must register with FinCEN, the agency’s Financial Crimes Enforcement Network. With increased regulatory pressure, bitcoin users advocate to withdraw bitcoin from exchanges.
Janet Yellen’s Treasury Department asked all virtual asset service providers (VASPs), including “cryptocurrency” exchanges, to fulfill Bank Secrecy Act standards in a series of reports published last week.
The recommendation came mere days after conflict broke out between Russia and Ukraine. “Crypto” payments, according to the Treasury, raise the possibility of illegal behavior. Coinbase stated that it has already blocked 25,000 wallets associated with Russia.
Treasury Also Deliberating on Self-Custody Wallets
The Treasury has highlighted worries about Bitcoin wallets housed on personal devices such as cellphones or hardware wallets. These “unhosted wallets” are capable of sending Bitcoin without the involvement of a third party. Is fear taking over at the Treasury? As hyperinflation speeds up and global faith in institutions dwindles, especially in the US, government bodies could lose trust and relevance.
It is feasible to follow transactions from VASP-controlled addresses to private ones. However, the Treasury Department stated that criminals might utilize unhosted wallets for unlawful conduct involving regulated parties that do not have reporting obligations, similar to the Bank Secrecy Act.
The Bank Secrecy Act compels financial service providers to establish strong anti-money laundering (AML) measures and to report suspicious activities.
When shipping more than $3,000 on behalf of a client, or issuing traveler’s checks or money orders between $3,000 and $10,000 to a single customer in a single day, record-keeping is required.
As the Treasury deliberates, members of Congress such as Warren Davidson (R-OH), Ted Budd (R-NC), Tom Emmer (R-MN), and Scott Perry (R-OH) have sent letters as well as legislative proposals like the ”Keep Your Coins Act”.
Why moving your Bitcoin from the exchange is critical
Not your keys, not your coins as the saying goes. The increased regulatory impact hitting the bitcoin industry shows that it’s just a matter of time until government regulators take action against holders of bitcoin.
While many users believe the promises given by exchanges about safety and insurance, history has shown how saving account can be plundered by governments in times of crisis. From ESG goals to economic stability, the government is great at finding new reasons to come after taxpayer money.
Recent events spanning from exchanges blacklisting and the move to regulate the industry, expose the vulnerability of third parties. Self custody is more essential than ever and bitcoin twitter is buzzing about the honorable act of withdrawing bitcoin from exchanges.
Even entire countries cannot rely on promises any longer. As the recent conflict with Russia revealed, gold can be seized. Any asset under custody of a third party does not provide the protection from the state and politicians that Bitcoin in self-custody does. Gold was co-opted by the state and centralized, Bitcoin separates the money from the state.
“Not Your Keys; Not Your Cheese” –@BitcoinZay
Bitcoin was designed to be taken into self custody. Self custody is fundamental to Bitcoin and necessary for enjoying the benefits of immutable, censorship-resistant, deflationary, peer-to-peer money.
- It is important to understand when it comes to Bitcoin, it is the holder of the private keys that controls the coins.
- This private keys are made into a seed phrase. This is the 12-24 word list that must be protected by the user at all costs. If the seed phrase is compromised, so is the bitcoin. Or in other words:
Not your keys, not your coin
Not your keys, not your corn
Not your keys, not your cheese
Exchanges Are Third Parties; Bitcoin is About Removing Third Parties
- Exchanges are where individuals can go to purchase Bitcoin and centralized digital assets(shitcoins). The error many make is purchasing and leaving their coins on the exchange where they can be seized, frozen, or hacked.
- Mt. Gox
- FCoin Insolvent
- Black Swan events are unpredictable. The, “That’ll never happen to me,” response when it comes to an exchange will not cut it.
- This is now a very real and exciting moment to demonstrate Bitcoin’s capability as censorship resistant money.
Non-Custodial to Hardware
- Once coins are purchased through an exchange it is important to take your Bitcoin off the exchange into self custody.
- The first step a user can take is to send their purchased coins to a non-custodial wallet. There are many great options. It is essential to write down your seed phrase, keep it offline, and keep it safe. One option I use is the CryptoTag.
- Blue Wallet
- Muun Wallet
- Green Wallet
Once Familiar Here the Next Step is a Hardware Wallet
- Hardware wallets allow a user to take their coins offline and take sovereign custody of their Bitcoin.
- A user should never give their seed phrase to anyone for any reason or purpose, anyone who asks is likely phishing to hack users.
- No reputable Bitcoin company will ask you for your seed phrase.
- Always purchase hardware directly through retailers and not third parties such as EBay or Amazon.
- ColdCard Wallet
While there are Bitcoin advocates in the US Government, don’t wait or rely on the state to protect you.