Coinbase CEO Brian Armstrong is sounding the alarm over a proposed regulation from the Department of the Treasury that would clamp down on the use of independent cryptocurrency wallets and potentially strengthen financial censorship.
Armstrong, the CEO of one of the world’s leading cryptocurrency exchanges, is emerging as a staunch opponent of “woke capital,” the colloquial term for businesses that use their economic clout to push a far-left agenda.
In October, Armstrong brought an end to political activism inside Coinbase, telling employees that political discussions were to be kept outside the office — and gave politically-minded employees a week to leave the company if they disagreed. Five percent of the company’s staff reportedly left the company over Armstrong’s dictum.
Now, Armstrong is warning that a rumored regulation from the Treasury department would clamp down on independent cryptocurrency wallets, which allow peer-to-peer financial transactions without the need for third-party intermediaries.
For those who don't know – self-hosted crypto wallets (also known as non-custodial wallets or self-custody wallets) are a type of software that lets individuals store and use their own cryptocurrency, instead of needing to rely on a third party financial institution.
— Brian Armstrong (@brian_armstrong) November 25, 2020
“Last week we heard rumors that the U.S. Treasury and Secretary Mnuchin were planning to rush out some new regulation regarding self-hosted crypto wallets before the end of his term. I’m concerned that this would have unintended side effects, and wanted to share those concerns,” said Armstrong.
“For those who don’t know — self-hosted crypto wallets (also known as non-custodial wallets or self-custody wallets) are a type of software that lets individuals store and use their own cryptocurrency, instead of needing to rely on a third party financial institution.”
“Self-hosted crypto wallets are important, because they allow anyone to use this new technology to access basic financial services — just like anyone can use a computer or smartphone to access the open internet.”
“This proposed regulation would, we think, require financial institutions like Coinbase to verify the recipient/owner of the self-hosted wallet, collecting identifying information on that party, before a withdrawal could be sent to that self-hosted wallet.”
Armstrong went on to list several problems with such a ruling.
“Many crypto users are sending crypto to smart contracts to use Defi apps. A smart contract is not necessarily owned by any individual or business who could be identified. It is a new type of recipient that doesn’t have any direct equivalent in traditional financial services.”
“Many crypto users are sending crypto to various merchants online, paying for goods and services. Does it make sense to require customers to help verify the identity of a business before they can buy a product there?”
“Many crypto users are also sending crypto to people in emerging markets, where it is difficult or impossible to collect meaningful “know your customer” information. Some of these individuals are living in poverty, and may not have any permanent address or form of government ID.”
“Many crypto users are using their crypto with new types of applications online. Imagine if every time you wanted to upvote some content on Reddit or transfer an item in a game you were hit with a form asking you to verify a recipient.”
“Finally, many recipients (in the U.S. or abroad) who value their financial privacy, may simply not want to upload more identifying documents to various companies, which could be hacked or stolen.”
Armstrong said he has sent a letter to the U.S. Treasury department outlining these and other concerns.
Republican congressman Warren Davidson (R-OH) has also urged the Treasury Department to reconsider, sending a letter to Treasury Secretary Steven Mnuchin stating:
“Before Treasury issues midnight rules on the regulation of self-hosted wallets, Secretary Mnuchin should come to the Peoples’ House and speak to representatives about what his regulations would do. Over-regulating self-hosted wallets will crush a nascent industry and leave the Unites States behind the rest of the world when it comes to harnessing the power of blockchain and cryptocurrency.”
“The wrong regulations will violate the financial privacy of users and send a message to the world that you shouldn’t build businesses or try new use cases for blockchain in the United States. I hope Treasury will carefully consider any action it takes on self-hosted wallets. I look forward to working with Secretary Mnuchin on this important issue for U.S. financial technology.”
Both Armstrong and Rep. Davidson failed to note another potential problem with regulating independent cryptocurrency wallets — it will empower the political left to financially blacklist their opposition.
Getting the political right kicked off funding platforms like Patreon, payment processors like PayPal, and even pressuring financial services to deplatform entire industries has been a growing theme on the political left for some time.
Presently, it is impossible to blacklist someone from their independent cryptocurrency wallet. No one owns the wallet except the user. However, if platforms like Coinbase are required to collect information from the owners of independent wallets — or even deny service to them in some circumstances — that will change.
The Southern Poverty Law Center (SPLC), a far-left organization that has worked with and pressured financial companies to financially blacklist right-wingers, complained in an article in 2017 that Bitcoin and other cryptocurrencies “leave a gap for hate groups.”
Allum Bokhari is the senior technology correspondent at Breitbart News. His new book, #DELETED: Big Tech’s Battle to Erase the Trump Movement and Steal The Election, which contains exclusive interviews with sources inside Google, Facebook, and other tech companies, is currently available for purchase.