Right to Self-Custody in Crypto Affirmed by SEC's Hester Peirce

Summary:
Hester Peirce, an SEC commissioner, emphasized the importance of self-custody in cryptocurrency, labeling it a fundamental human right. This statement comes at a time when efforts to clarify regulations in the crypto market are ongoing, highlighting the tension between self-custody and the emergence of exchange-traded funds (ETFs).

Key Takeaways

Hester Peirce asserts that self-custody of cryptocurrency is a basic human right.
Financial privacy should be the norm, not the exception.
The Digital Asset Market Structure Clarity Act, which includes key provisions for self-custody, has been delayed until 2026.
There is a notable trend of Bitcoin holders shifting from self-custody to ETFs to enjoy tax benefits and ease of management.
This shift raises concerns within the crypto community regarding the core principles of Bitcoin.

Hester Peirce, a commissioner with the United States Securities and Exchange Commission (SEC) and the leader of the SEC's Crypto Task Force, has reiterated the essential right to self-custody of cryptocurrency and the need for privacy in financial transactions. During an interview on The Rollup podcast last Friday, Peirce stated, “I’m a freedom maximalist,” emphasizing that self-custody of assets is a fundamental human right.

Privacy, SEC, Freedom, United States, Self Custody, Bitcoin Adoption, ETF SEC commissioner Hester Peirce discusses the right to self-custody and financial privacy. Source: The Rollup

Peirce further noted that there should be a standard for online financial privacy. “It has become the presumption that if you want to keep your transactions private, you're doing something wrong, but it should be exactly the opposite presumption,” she remarked. Her comments are particularly relevant as the Digital Asset Market Structure Clarity Act, which includes provisions for self-custody, anti-money laundering (AML) regulations, and asset classification, has been postponed until 2026, according to Senator Tim Scott.

Crypto self-custody is a fundamental right, says SEC's Hester Peirce

Shift from Self-Custody to ETFs

With the rise of exchange-traded funds (ETFs) that allow easier management of cryptocurrency, many significant Bitcoin holders and long-term investors are moving away from self-custody. This shift is largely motivated by the tax advantages and simplified management that ETFs offer.

Dr. Martin Hiesboeck, head of research at the crypto exchange Uphold, stated, “We are witnessing the first decline in self-custodied Bitcoin in 15 years.” He attributed this trend to the SEC’s approval in July of in-kind creations and redemptions for crypto ETFs, which permit authorized holders to swap crypto for ETF shares and back without incurring a tax event, unlike cash-settled ETFs. Hiesboeck lamented that moving away from the self-custody principle of “not your keys, not your coins,” signifies a further erosion of the original spirit of cryptocurrency.

Privacy, SEC, Freedom, United States, Self Custody, Bitcoin Adoption, ETF Source: Dr. Martin Heisboeck

In February, renowned Bitcoin analyst and investor PlanB, developer of the Bitcoin stock-to-flow model, revealed that he had transferred his Bitcoin holdings into ETFs to reduce the complications of managing private keys. This announcement sparked a significant response from the Bitcoin community, with many expressing concerns that relinquishing custody to a third party undermined Bitcoin's fundamental principles.

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