Coin World News Report:
Ethereum co-founder Vitalik Buterin publicly criticized MicroStrategy co-founder Michael Saylor’s recent comments on Bitcoin self-custody.
In a recent interview, Saylor was asked whether handing over Bitcoin custody to large banks and third-party entities would bring centralization risks and potentially lead to government seizures of individuals’ cryptocurrency assets.
MicroStrategy’s co-founder responded by stating that the risk of confiscation increases when Bitcoin is held by “paranoid crypto-anarchists” who do not recognize government regulation.
Buterin disagreed with Saylor’s comments in a subsequent tweet. “I am glad to say that I think Saylor’s comments are crazy,” he wrote, adding that Saylor “seems to explicitly advocate for regulatory capture as a way to protect cryptocurrencies.” The Ethereum co-founder also added that this approach goes against the core principles of cryptocurrencies.
What is self-custody?
Self-custody is the process of maintaining control over one’s own private keys, which means that no external party can access your cryptocurrency wallet.
Because this method involves a certain level of inconvenience and risk—keys can be lost or stolen with no recourse—some users turn to third-party custodians. This involves an independent custodian controlling the private keys to the user’s cryptocurrency wallet.
The risks associated with third-party custody can generally be summarized as “not your keys, not your coins,” meaning the third party has complete control over the assets and theoretically can freeze or misappropriate them, potentially under pressure from authorities.
Debate about self-custody rights
Buterin was responding to a tweet by Jameson Lopp, co-founder of crypto self-custody platform Casa HODL, sharing his views on self-custody. Lopp emphasized that self-custody is crucial not only for individual Bitcoin holders but also for the overall health of the network. He stated, “Self-custody is critical for the continued strengthening and improvement of the entire network.”
Lopp explained how centralizing cryptocurrencies in a few wallets would increase systemic risks of loss and confiscation and deprive users of the ability to run nodes or participate in forked transactions.
He also claimed that this would diminish development incentives as “institutions don’t care about more advanced crypto features” and “permissionless innovation gets deprioritized as we can only scale through trusted third parties.”
While Saylor seems to disagree, the movement for cryptocurrency self-custody appears to be gaining momentum since the collapse of the FTX cryptocurrency exchange in 2022. As early as May, Oklahoma became the first U.S. state to pass a law protecting Bitcoin self-custody rights.
As the chairman of MicroStrategy, Saylor has been committed to an aggressive strategy of acquiring Bitcoin for the company’s treasury. The company currently holds over 1% of the mined Bitcoin, valued at around $16 billion.
Earlier this month, Saylor outlined MicroStrategy’s transformation from a software company to what he calls a “Bitcoin bank” by issuing Bitcoin-backed securities, with a valuation potentially reaching trillions of dollars.
