Crypto policy changes drive interest in self-custody solutions

All over the world, countries are coming up with their crypto policies. While some users see these policies as developments that help against the risks in the crypto market, others see them as a way for the government to monitor their activities.

According to a Coinbase survey, 56% of crypto users in the United States now know about self-custody solutions, with a 22% rise in non-custodial wallets since 2023. The University of Illinois researchers noted that self-custody wallets hold 35% of the total market supply, up from 25% in 2022.

While decentralization remains one of the ethos of the crypto industry, it is no longer news that bad actors take advantage to carry out illegal transactions. Meanwhile, these atrocities do not bother some users as they want control over their tokens, driving them to the decentralized finance (DeFi) sector. Although centralized exchanges promise better security of funds and assets, there have been high-profile cases of these platforms being breached.

Users continue to lose faith in centralized platforms

Crypto wallet Exodus registered a 107% revenue, with its CEO JP Richardson noting that the surge in the demand for self-custody solutions is directly responsible for the rise. “Self-custody is the future. As trust in centralized platforms continues to erode, more people are realizing the importance of owning their keys,” Richardson said. “Recent changes in the USA have certainly been gratifying. We actively engage with regulators—and have for years—to advocate for self-custody as a fundamental right,” he added.

Founder and CEO of crypto wallet Cowchain Mykhailo Adzhoiev mentioned that the increase in the adoption of self-custody wallets has reinforced a popular belief that if a token is not in your wallet, it’s not yours. “Self-custody is no longer just for the hardcore crypto nerds. It’s becoming the gateway for onboarding the next wave of users,” Adzhoiev said.

According to analysts at NAKA, users are now moving towards decentralized systems as they prefer to control their private keys. According to their research, self-custody wallets may hit $3.5 billion by 2031.

Crypto policies are boosting self-custody solutions

One of the key crypto regulations in the crypto market is the Markets in Crypto-Assets (MiCA) regulation in the European Union. The regulatory framework has been hailed as one of the most complete globally as it provides clarity and security in the crypto industry. It features transparency, market integrity, strict compliance measures, and investor protection.

In the United States, the Securities and Exchange Commission (SEC) has traditionally overdone its enforcement of exchanges, pushing users to explore decentralized exchanges as a means to gain control over their assets. While the new Trump administration has promised better laws and the way enforcement will be carried out, it remains to be seen if things will change.

The FATF’s Travel Rule, now mandates crypto exchanges to collect and share transaction information, causing uproar about privacy concerns. The move has also led to a shift to self-custody solutions, as users continue to look for ways to maintain autonomy. In addition, other countries are also coming up with regulations to help the move.

Cryptopolitan Academy: Tired of market swings? Learn how DeFi can help you build steady passive income. Register Now