Why Impeding the Use of Self-Hosted Wallets Puts the U.S. at an Economic, Social, and National Security Disadvantage

By Amy Davine Kim, Chief Policy Officer, Chamber of Digital Commerce

Self-hosted wallets (wallets that are not hosted by a financial institution) play an important role in the digital asset ecosystem. These self-hosted digital wallets are no different than the leather wallet in your handbag or pocket: they help you hold different tools and assets that you use in the digital world, just like a leather wallet holds your cash, credit cards, or driver’s license.

Often digital wallets are “hosted” by an exchange like Coinbase, eToro, Gemini, Bittrex, and others, meaning that those companies help administer the wallet by providing custody and other services for you.  When you want to use something in your digital wallet, you simply instruct them to do it for you.  A self-hosted wallet is similar to when you yourself reach into the wallet in your pocket or handbag to grab your cash to spend it where you wish – whether at the coffee shop, the hardware store, or at Overstock or another online retailer.

Some policy makers, such as the Financial Action Task Force (FATF), a multigovernmental body that sets anti-money laundering recommendations globally, have expressed concern over self-hosted wallets, even suggesting they be banned outright.


Proscribing or severely limiting the use of self-hosted wallets is a bad idea, and here’s why:

1. Self-hosted wallets are the equivalent of the wallet in your pocket or handbag. We would never suggest that consumers can no longer use cash.  This concept is no different simply because we are operating in a digital environment.  As we have seen with the Covid-19 crisis, the world is moving rapidly toward the need to operate digitally, but that does not mean that we lose our rights to privacy and security in the process.

2. According to a recent BIS report, 80% of central banks are looking to potentially issue their own currency digitally. This includes the United States.  If self-hosted wallets are prohibited or severely limited, citizens would have to conduct all activity using a digital dollar through their bank or other regulated financial institution.  Also, among that 80% are key economic competitors such as China, the E.U., Japan, and others.  Any proscription would greatly tilt the playing field in their favor at our expense.

3. Wallets hold value. Value constitutes more than just fiat money.  It can also include your identity, which is intricately connected to the way in which you authenticate yourself to banks and every other account-based website.  They can also hold value generated online, including airline miles and customer points.  None of these things should be prohibited or limited in the digital world any more than they are in the physical world.

4. Of the countries that are actively testing issuing their own currency digitally is China, which has already processed over the equivalent of $300 million in digital yuan through pilot programs. We were caught flat-footed in remaining competitive with 5G in the telecom sector.  Must we again fall behind because we are unwilling to invest in and support another technology sector?  Everyone is aware there are risks when operating in a digital environment.  What we must do is understand those risks, mitigate them, and march forward.


These are just 4 examples of why a hasty move under a perceived deadline of January 20 can greatly impact an entire world of possibilities for global digital economies.  We should not impose anything this drastic without following proper rulemaking procedures, including extensive consultation with industry and policy makers over the effects on social and economic progress and national security and how we can address concerns of all involved.

Self-hosted wallets have been on policy makers’ radars for some time, and we have engaged with both U.S. and multilateral policy makers in educating and advocating on this issue. This work must continue, ideally through a coordinated approach, to ensure that we do not further inhibit the technology leadership of the United States and the commercial rights of all who do business here.