Definition ∞ Non-custodial service impact refers to the consequences or implications of financial services where users retain full control over their digital assets, rather than entrusting them to a third party. This model offers enhanced security and autonomy but presents challenges for traditional regulatory oversight, particularly regarding AML and KYC compliance. The absence of a central custodian alters the dynamics of regulatory enforcement and user responsibility.
Context ∞ The regulatory landscape is actively grappling with the non-custodial service impact, particularly concerning decentralized finance (DeFi) protocols and self-hosted wallets. A key debate involves how to apply existing financial regulations to systems without traditional intermediaries. Future policy developments will likely explore new approaches to address illicit activities while preserving the core principles of decentralization and user self-sovereignty.
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