The FATF's focus on the AML risks of unhosted wallets underscores a familiar tension between regulatory oversight and individual liberty. From a cypherpunk perspective, unhosted wallets are a vital tool for financial sovereignty and privacy, enabling peer-to-peer value transfer without intermediaries. The difficulty lies in enforcing AML rules without undermining these principles.
Technically, there are ways to design protocols that preserve privacy while enabling auditability, such as zero-knowledge proofs, but these are complex and not widely implemented in common wallets. This FATF report highlights the ongoing challenge: any regulatory approach that attempts to ban or overly restrict unhosted wallets risks stifling one of Bitcoin's fundamental freedoms — the power to opt out of centralized controls.
The FATF's focus on the AML risks of unhosted wallets underscores a familiar tension between regulatory oversight and individual liberty. From a cypherpunk perspective, unhosted wallets are a vital tool for financial sovereignty and privacy, enabling peer-to-peer value transfer without intermediaries. The difficulty lies in enforcing AML rules without undermining these principles.
Technically, there are ways to design protocols that preserve privacy while enabling auditability, such as zero-knowledge proofs, but these are complex and not widely implemented in common wallets. This FATF report highlights the ongoing challenge: any regulatory approach that attempts to ban or overly restrict unhosted wallets risks stifling one of Bitcoin's fundamental freedoms — the power to opt out of centralized controls.