CZ and Saylor urge for crypto self-custody amid increasing uncertainty

November 14, 2022 Coin Telegraph

Binance CEO Changpeng Zhao said self-custody is a “fundamental human right,” while Michael Saylor said self-custody is necessary to prevent powerful actors from accumulating and abusing power.

Industry heavyweights have urged crypto investors and traders to self-custody their crypto assets amid the significant market uncertainty brought on by the collapse of FTX.

In a Nov. 13 tweet to his 7.6 million followers, Binance CEO Changpeng “CZ” Zhao pushed the crypto community to store their own crypto via self-custody crypto wallets.

“Self custody is a fundamental human right. You are free to do it anytime. Just make sure you do do it right,” he said, recommending investors to start with small amounts in order to learn the technology and tooling first:

Self custody is a fundamental human right.
You are free to do it at any time.
Just make sure you do do it right.
Recommend start with small amounts to learn the tech/tools first.
Mistakes here can be very costly.
Stay #SAFU
— CZ Binance (@cz_binance) November 13, 2022

Speaking to Cointelegraph during the Pacific Bitcoin conference on Nov. 10-11, MicroStrategy executive chairman Michael Saylor also discussed the merits of self-custody given the current market environment.

Saylor suggested that self-custody not only provides investors with property rights, it also prevents powerful actors from corrupting the network and its participants:

“In systems where there is no self-custody, the custodians accumulate too much power and then they can abuse that power.”

“So self-custody is very valuable for this broad middle class, as it tends to create [...] this power of checks and balances on every other actor in the system that causes them to be in continual competition to provide transparency and virtue,” he explained.

Backstage interview with the charming Michael @saylor ⚡️

✅ check @Cointelegraph to read his advice on how to handle the bear market

@pacificbitcoin

pic.twitter.com/yWZmEsgQar
— Joe Nakamoto (@JoeNakamoto) November 11, 2022

Saylor also made the argument that self-custody plays an important role in maintaining the integrity and security of blockchains because it increases decentralization:

“If you can’t self-custody your coin, there’s no way to establish a decentralized network.”

The recent events that transpired last week appear to have already pushed many investors and traders towards self-custody solutions.

Since the sudden collapse of FTX in early November, the number of Bitcoin (BTC) withdrawals on centralized exchanges reached a 17-month high, according to on-chain analytics firm Glassnode:

#Bitcoin $BTC Number of Exchange Withdrawals (7d MA) just reached a 17-month high of 3,424.315

View metric:https://t.co/QyB7zouWee pic.twitter.com/Su4biTEM7h
— glassnode alerts (@glassnodealerts) November 13, 2022

While at the same time, net inflows into self-custody wallets have soared.

Smart contract wallet Safe — previously Gnosis Safe — reported over $800 million in net inflows since last Tuesday when the FTX saga began to spiral out of control:

Over $800M net in-flows into @Safe since last Tuesday. $325M on Thursday alone. Looks like a flight to self-custody. pic.twitter.com/hiuij9dp7s
— lukasschor.eth | Safe (@SchorLukas) November 13, 2022

The outflow from centralized exchanges caused by the FTX meltdown also created problems for hardware-based cryptocurrency wallet provider Ledger — who were temporarily unable to process a mass influx of inflows due to scalability issues.

The token of the Binance-acquired self-custody wallet Trust Wallet (TWT) also increased 84% to $2.19 over the last 48 hours before cooling off to $1.83, according to CoinGecko.

The token allows token holders to participate in deciding how the wallet operates and what technical updates are to be made.

Investor confidence in centralized exchanges took another hit on Nov. 13 when Crypto.com accidentally sent 320,000 ETH to Gate.io.

Ethereum bull and host of The Daily Gwei Anthony Sassano on Nov. 13 called out the crypto exchange over its mistake and later stated that investors should not store assets on centralized exchanges “for longer than you need to.”

Meanwhile, Blockchain Association head of policy Jake Chervinsky said that self-custody education should be one of the first things newcomers learn, while Bitcoin proponent Dan Held told his 642,800 Twitter followers that self-custody is a crucial element to self-sovereignty:

Self custody your Bitcoin and run a full node.

That’s how you achieve self sovereignty.

Don’t trust, verify.
— Dan Held (@danheld) November 12, 2022

US Treasury Clarifies How to Comply With Regulations on Sanctioned Crypto Mixing Service Tornado Cash

September 17, 2022 Bitcoin.com

Crypto Community Responds to Tornado Cash Sanctions, Privacy Advocates Say ‘There Are Many Legitimate Reasons to Seek Financial Anonymity’

August 12, 2022 Bitcoin.com

Treasury Dept. wants to ‘capture DeFi’ with infrastructure bill: Jake Chervinsky

August 18, 2021 Coin Telegraph

Coin Telegraph

General counsel to Compound Labs, Jake Chervinsky, has warned that the Treasury Department wants to “capture” the DeFi sector through the crypto provisions added to the infrastructure bill.

The last-minute cryptocurrency provisions added to the U.S. infrastructure bill sought to “capture DeFi,” argues Compound’s general counsel Jake Chervinsky.

Appearing on the Bankless State of the Network podcast on August 17, Chervinsky — who is also DeFi Chair of the Blockchain Association — said the industry had been “blindsided” by the infrastructure bill’s crypto tax provisions which were announced just nine days prior to when it was expected to pass through the senate.

While Chervinsky seemed willing to give most elected officials the benefit of the doubt, noting that previous discussions surrounding the infrastructure bill had “nothing to do with crypto,” he attributed more sinister motives to the Treasury Department’s role in influencing the legislative process.

Conceding he may have donned a “tin-foil hat,” Chervinsky argued that the Treasury Department was looking for an alternate way to invoke the harsh reporting requirements former Treasury Secretary Steve Mnuchin had sought to impose on self-custodied crypto wallets.

“This is all about DeFi [...] This is the Treasury Department trying to work out how to get jurisdiction over DeFi [...] and also expand its warrantless surveillance over a peer-to-peer financial system.”

Cherversinky stated he was informed that the Treasury Department had initially opposed exempting network validators and software developers from stringent third-party reporting requirements under the bill as it was concerned the altered legislation would not “adequately capture DeFi.”

“That’s why we couldn’t get the language changed to only capture the centralized exchanges,” he concluded:

“We found out very quickly that it wasn’t just a senator’s misunderstanding [...] The Treasury Department had played an important role in drafting the language and also [ensuring] that any revision we proposed was going back to the Treasury Department for their approval or rejection.”

Chervinsky’s understanding is that Treasury feared the industry would argue that DEX liquidity providers and other DeFi participants are involved in validating transactions and should therefore be exempted from the regulation.

“As I understand it, that’s why we then got a competing amendment that specifically said the exemption is only for Proof-of-Work miners,” Chervinsky added.

“The idea that you would carve out an exemption for what is viewed as the really bad, horrible climate change-causing, ocean-boiling Proof-of-Work mining, but then not have that exemption for Proof-of-Stake validators just made absolutely no sense.”

Despite the Treasury Department backing down on its position after realizing it could not “steamroll the industry,” Chervinsky emphasized he was concerned unelected Treasury officials have too much influence on the legislative process.

“The idea that secretly, behind the scenes, it isn’t senators we’re negotiating with [...] it’s some unknown bureaucrat buried in the Treasury Department — to me, that’s a deeply troubling situation to be in,” he said.

But Chervinsky celebrated the achievements of the crypto lobby in pushing back against the provisions:

“The entire industry basically without exception banded together to fight this [...] Yes, this bill is a threat, but more important [...] was how effectively the industry was able to rally and defend itself in D.C.”

US Senator claims support for crypto amendments despite blocking bill

August 11, 2021 Coin Telegraph

amendment

Senator Shelby claims he supported the cryptocurrency provisions of the amendment to the infrastructure bill that his sole objection blocked from passing the senate.

On July 29, Cointelegraph reported that provisions had been hastily added to the infrastructure bill that sought to raise $28 billion through expanded taxation and impose stringent third-party reporting requirements for any entity deemed to comprise a cryptocurrency “broker.”

The provision’s broad language sent shockwaves across the crypto community, with onlookers noting that software developers, hardware wallet providers, and miners and other network validators would likely be classified as brokers and required to report information on counterparty network participants that they are unable to collect.

Taking to Twitter yesterday, Senator Richard Shelby expressed support for the amendment put forward by senators Pat Toomey, Cynthia Lummis, Rob Portman, Mark Warner, Ron Wyden, and Kyrsten Sinema that would have exempted software developers, transaction validators and node operators from the third-party reporting requirements.

Despite his stated support, Shelby asserted he objected to the amendment over his dissatisfaction with the defense spending allocations contained in the legislation.

Richard Shelby, the 87-year-old Republican senator whose sole objection led to the bi-partisan infrastructure bill passing through the Senate without amendment on Aug. 10, has revealed he actually supported changes to the bill’s cryptocurrency provisions that his vote ultimately blocked.

I supported @SenToomey cryptocurrency amdt. I know of its importance to innovation & job creation, but I believe it pales in comparison to the security of our nation–which is why I called for a vote on my defense infrastructure amdt. It's unfortunate that Dems blocked both amdts.
— Richard Shelby (@SenShelby) August 10, 2021

The crypto community has slammed Shelby for his actions, with the comments to his post nearly exclusively populated with angry outpourings from crypto-natives.

Twitter-user David Zell noted that Shelby’s largest donors from 2015 until 200 were commercial banks and firms representing the securities and investments sector — which donated more than $870,000 to Shelby over the period.

And y'all thought this was about military spending... pic.twitter.com/dWkD1iP0K4
— David Zell (@DavidZell5) August 9, 2021

Jake Chervinsky, general counsel to Compound Finance, also criticized Shelby, highlighting that the Senator is retiring at the end of his term.

Despite the popular amendment failing to pass the Senate, Chervinsky offered that it is “very unlikely” DeFi developers will be targeted under the infrastructure bill’s original language.

It's very unlikely that software developers who only write code would be "brokers" under the current definition.

You have to torture the language to make it remotely fit devs, & even then it'd likely violate the First Amendment.

Anyway, I really don't think devs are the target. https://t.co/rtobFxUlTM
— Jake Chervinsky (@jchervinsky) August 10, 2021

The bill must now pass through the House of Representatives, which is in recess until September 20.

Jake Chervinsky

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