Unhosted wallet regulation refers to rules applied to cryptocurrency wallets that users control themselves. This term describes the regulatory efforts aimed at establishing oversight for digital asset wallets where the user retains direct and exclusive control over their private keys, rather than relying on a third-party service provider. Regulators are exploring mechanisms to apply anti-money laundering and counter-terrorist financing measures to transactions involving these self-custodied wallets. The challenge involves balancing financial security concerns with individual privacy and the decentralized nature of blockchain technology.
Context
News frequently covers debates and proposals concerning unhosted wallet regulation, particularly in jurisdictions implementing the Financial Action Task Force’s “Travel Rule.” The discussion often centers on the feasibility and proportionality of implementing such regulations without hindering innovation or privacy. Future regulatory frameworks will likely seek technologically neutral approaches to address risks associated with unhosted wallets while respecting their fundamental role in decentralized finance.
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