Self-Custodial Wallets are digital asset storage solutions where the user retains exclusive control over their private keys, and thus, direct ownership of their cryptocurrencies. Unlike custodial services, no third party holds or manages the user’s funds. This grants individuals complete autonomy over their digital assets, but also places full responsibility for security and key management on the user. They embody the core principle of financial sovereignty.
Context
The discussion around Self-Custodial Wallets often centers on the balance between user control and the significant responsibility of securing private keys. Regulators sometimes express concerns about their use in illicit activities due to the lack of intermediary oversight. A critical future development involves improving the user experience and security features of self-custodial solutions, such as social recovery mechanisms, to make them more accessible and safer for a wider audience.
CASPs must integrate bank-level AML/KYC for transactions exceeding €1,000 and cease offering anonymous wallets, fundamentally altering the EU's compliance architecture.
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