Another reason why you need to think twice before using custodial wallet

[Rruchi man]

what if the bad people can be part of the government and can track people and use the information against them and be used in wrench attacks?

These cases raise the question of who has access to sensitive information citizens provide to their government and would they use it for bad purposes.

There will always be humans in contact with sensitive information provided even to the government. Because of that, you can never fully avoid bad actors coming in contact with this information because even if the people who encounter this information started as uninterested in it or upright in their position, there's a very huge chance over time when they realize the advantage they have that they could start stealing sensitive information from and selling to others, ignoring the consequences of their actions.

The government had issues with Bitcoin because of decentralization, they are now relaxed because they have found a way to track bitcoiners who prefer convenience to privacy.

It will be very difficult to imagine a future where Bitcoin users are allowed to flourish without any form of identification or control; the government must want to have knowledge of the people involved and also have some form of control over it even if it is not total control.

[ZAINmalik75]

There is nothing new or surprising in this, they have always been the same and they will always be the same. People need to understand that centralization is centralization, and just because there are cryptocurrencies involved, it doesn't mean centralization is different; it still gives government and authorities access to all your funds, personal information, and financial records so that they can do whatever they want to do with it, and there is absolutely nothing you can do about that other than not using centralized platforms anymore.

Besides, even if people stop using custodial wallets and move to self-custody, centralized exchanges will still be used in large numbers, and that's because people love convenience, more than their privacy, and centralized exchanges povide them the convenience they crave, because you can literally do every single thing within a single platform; making trades, converting funds from one crypto to another, doing P2P trades, and a bunch of other stuff that you can't find in a single place if you for decentralization.

[Faisal2202]

Any form of privacy is a problem to all governments. Some will not be as direct as this but will subtly implement it on any centralised exchange within yhwur jurisdiction so they will all need you to KYC before you can transact.

If you're using a centralised service you're already opting to break your pseudoanonymity and if you're keeping your coins stored on such platform you're giving up control entirely.

- Jay -

But why do they want that much control? I know why, but my question is to what extent. It is like greed, which I think will never end.

What will they do after knowing our location? A normal person who trusts the state will say nothing, I did nothing wrong, I want to send and receive BTC and that's it. But if the official with your IP is corrupt and uses it for their own good by giving the details to the wrench attackers or thieves, then it can become a serious problem.

We can't travel with our crypto smartphone because if someone from the authority checks the device and finds TW even in it, they will start making fake cases until we give them something. Don't know why these people think it is free money. Why don't they check banks?

It is frustrating. I did not know about the Xapo that OP thought. It is really strange though, but we should maintain privacy if we can.

[danieldavidd]

I don't think you going through investment that you don't have control over it will no be possible or easier for you to accept and kind of negotiations and depend on cetern organization to manage your funds for you without. you having any control over it.because you won't have any rest of mind what ever you running as an investor you should have control over it at list 70% to 80%you have control over it to be able too access through by self. when something is centralized it centralized.

Thank you

[MRY]

There is nothing new or surprising in this, they have always been the same and they will always be the same. People need to understand that centralization is centralization, and just because there are cryptocurrencies involved, it doesn't mean centralization is different; it still gives government and authorities access to all your funds, personal information, and financial records so that they can do whatever they want to do with it, and there is absolutely nothing you can do about that other than not using centralized platforms anymore.

Besides, even if people stop using custodial wallets and move to self-custody, centralized exchanges will still be used in large numbers, and that's because people love convenience, more than their privacy, and centralized exchanges povide them the convenience they crave, because you can literally do every single thing within a single platform; making trades, converting funds from one crypto to another, doing P2P trades, and a bunch of other stuff that you can't find in a single place if you for decentralization.

The essence of centralization remains unchanged, even with the latest blockchain technology innovations. Placing the assets control in third party hands automatically predisposes regulation and total data supervision. The fact that people are oriented to centralized exchanges reveals the fact that convenience and everything under one roof is prioritized over the privacy protection. This scenario guarantees that the medium platforms will certainly maintain a high user base in the proportion of loyal users, despite the ongoing campaign on the importance of owning the medium of education independently.

[Renampun]

Thankfully Bitcoin transaction from one wallet to another using ID won't work unless you are using Xapo like wallets (custodial).
The Agenda is real, they won't stop.

Yes, self-custody wallets give you freedom and a certain level of pseudonymity, since your assets are tied to wallet addresses rather than directly to your identity.. this means people will never know who is behind the wallet.

this is why self-custody wallets are the solution for people who want to maintain privacy and control over their assets, as no one will be able to reveal their identity.. however, be sure to never connect them to an exchange, because if you do, then it is the same as having revealed your identity.

[ColdLava40]

Thankfully Bitcoin transaction from one wallet to another using ID won't work unless you are using Xapo like wallets (custodial).
The Agenda is real, they won't stop.

The agenda is to remove every form of privacy from cryptocurrency.

But because of how Bitcoin was built, the government are fed up already since they are not able to get what they so much desire from Bitcoin.

Who are those giving them the chances to make such decisions?

Obviously the centrally derailed investors. Those who can't simply accept the fact that these centralized exchanges are not protecting your coins, they own them. Their problems already begun when they chose to trust centralized systems.

[MadSl1m]

The thread is treating custody and identity as one dial, and they aren't. 

There is a whole product category where your coins never leave your own wallet and full KYC is still mandatory. Gnosis Pay verifies through SumSub, Ether.fi Cash requires it on every tier, MetaMask and Ledger both run it through Baanx. The funds sit in a wallet you hold the keys to right up to the moment you tap. I keep a spreadsheet of 140 of these cards you can actually get today. 34 are genuinely self-custody, and all 34 of them require KYC. Exactly one has any no-KYC path at all, Decaf, and it caps out around $324 a purchase before asking for documents anyway.

The reason is the bit being missed here. Verification attaches to the regulated entity issuing the card, not to whoever holds the coins. Same with the Travel Rule and the CARF timeline raised upthread, both bind the service, not the custody model.

So non-custodial buys you one specific thing, which is that nobody can freeze or lose your balance. It buys you nothing on identity the moment you touch a regulated on-ramp or off-ramp. Those two risks fail differently and they're defeated differently, and planning for one as though it covers the other is how people end up surprised.

[Darker45]

With a number of exceptions, though. With what happened recently, it seems "full control" is becoming a myth. One who has been hodling on YoBit could have laughed at somebody else for keeping his on a hardware wallet.

Not really.  The Coldcard victims were in actual full control of their own very low security Seed.  I mean.  I could create a really simplistic Brain Wallet right now and only because my Bitcoin gets sweeped in a couple of seconds it does not mean I did not have full control.

You have full control over the Seed you have.  If you generate a low security one or put it in a website telling you to give them your Seed to upgrade to post Quantum security, that is something else.  It is not becoming a myth at all.

I subscribe to the logic that if somebody else can do something over that which you supposed to have full control, then you simply don't have full control.

If one claims to have full control of his/her private keys but somebody else can obtain it one way or another without asking or forcing him/her to give it up, then he/she doesn't have full control.

If a user of a non-custodial wallet believes he/she has full control of his/her funds yet somebody else can actually spend them beyond his/her permission, then at most what he/she has is shared control.

[Livingleged]

They have asked every transaction being received by each user and that has caused a lot of users to move to international exchanges but then, the timing was perfect when our SEC has also banned the international exchanges such as binance but, it's now legal and permitted to operate again in our country.

Sorry, I don’t get it. You mean Binance was ban or the p2p features was banned? In regulating the bitcoin transaction, In my country what happened was that the p2p feature was restricted from Binance and even until now you can’t trade my country’s fiat for any coin on Binance via p2p.

Well, I have read a lot about custodial wallet here and how unsafe it is for us to have our holdings there, because a third party has control over out keys and anything could happen. But I think I’m still very much okay with it. I have been using a custodial wallet for a while now and I’ve never had issues of security or coins theft or something related. That should be convincing enough that not everyone will/ must have their holdings on non custodial wallet. and I will take full responsibility of my actions if anything happens with the exchange that I’m using.

[Die_empty]

But why do they want that much control? I know why, but my question is to what extent. It is like greed, which I think will never end.

What will they do after knowing our location? A normal person who trusts the state will say nothing, I did nothing wrong, I want to send and receive BTC and that's it. But if the official with your IP is corrupt and uses it for their own good by giving the details to the wrench attackers or thieves, then it can become a serious problem.

We can't travel with our crypto smartphone because if someone from the authority checks the device and finds TW even in it, they will start making fake cases until we give them something. Don't know why these people think it is free money. Why don't they check banks?

It is frustrating. I did not know about the Xapo that OP thought. It is really strange though, but we should maintain privacy if we can.

I had a conversation with an economist who worked with a top corporation in my country. He told me that the government needs to control the crypto space because they need to make monetary policies. He claimed that they need all the transaction information to enable them to make sound monetary policies. The government will keep making non-custodial crypto services difficult to operate.

You seem to have the same problem we are facing in my country. Some law enforcement agencies see those who own crypto as scammers. They still have this archaic false orientation that crypto is mainly used by criminals.

[abaeze]

Bitcoin banks, government reserves, new laws, and government regulation for security all add to Bitcoin, putting a different kind of pressure on its privacy, and this pressure will only get worse in the future. How these government issues align with Bitcoin's core principles is a matter of concern. In the case of Bitcoin, self-custody is not just about keeping your own coins, but it is also an important part of financial sovereignty.

However, in addition to self-custody, how coins are acquired, spent, and transferred is also important for protecting privacy. I have been doing extensive research on these issues after watching a news story recently, but I am skeptical about the results, as to what the situation will be like when Bitcoin is used more widely in the future.

[Myleschetty]

Maybe when people start to realize that these centralised governments are after their every movement they will start taking privacy more serious because tell me how this is not getting out of control already?

Indeed, this is a more serious issue that will impact the majority of South Korean cryptocurrency enthusiasts. Aside from the fact that the central government has made things difficult for crypto holders.
People ought to take their privacy more seriously because many cryptocurrency holders have suffered physical attacks as a result of their personal information being linked on the dark web. Privacy is freedom from any kind of bad actors.

Here is another, from Xapo, one of the most hated Bitcoin holder in my list, because they cater away with my Bitcoin years back,  I was new to Bitcoin and Xapo looked like a good option without me doing any research to tell the difference between custodial and non-custodial wallet.

One of the long-running cryptocurrency platforms before Binance, which should be among the top ones, is Xapo. However, their level of operation causes people to disregard their service, as evidenced by the current user location requirement.

[oll]

Maybe when people start to realize that these centralised governments are after their every movement they will start taking privacy more serious because tell me how this is not getting out of control already?



This is the second time that I am seeing something like this in this month of August, now you can't make any Bitcoin transactions without some form of identification.

Here is another, from Xapo, one of the most hated Bitcoin holder in my list, because they cater away with my Bitcoin years back,  I was new to Bitcoin and Xapo looked like a good option without me doing any research to tell the difference between custodial and non-custodial wallet.



Thankfully Bitcoin transaction from one wallet to another using ID won't work unless you are using Xapo like wallets (custodial).
The Agenda is real, they won't stop.

I also respect solely storing bitcoins in my hands without handing over my keys to any intermediaries. I also do not respect such phenomena as KYC on exchanges, as well as funds that buy bitcoin for you. They don't actually give you Bitcoin, but you just get some wrappers without a guarantee, and these guys won't restore it to you if your bitcoins are stolen through hacker attacks. The best thing is to buy yourself a cold wallet that will allow you to save bitcoins. Because it will also completely preserve your anonymity, because you will not reveal your identity and will not send your documents anywhere, and, of course, the seed phrase will be exclusively yours.

[freedomgo]

Thankfully Bitcoin transaction from one wallet to another using ID won't work unless you are using Xapo like wallets (custodial).
The Agenda is real, they won't stop.

Yes, self-custody wallets give you freedom and a certain level of pseudonymity, since your assets are tied to wallet addresses rather than directly to your identity.. this means people will never know who is behind the wallet.

this is why self-custody wallets are the solution for people who want to maintain privacy and control over their assets, as no one will be able to reveal their identity.. however, be sure to never connect them to an exchange, because if you do, then it is the same as having revealed your identity.

If bitcoin is all about anonymity and pseudonymity, hence decentralized wallets are best for all bitcoin holders. Putting our bitcoin into non-custodial wallet does not give us an advantage in the first place, it will only put the future of our bitcoin at a high risk of losing.

However, if we still fall on the trick of every centralized platforms and claim that they can take care of our bitcoin without us worrying, that goes to show that you as a bitcoin holder does not understand your investment well, that is why before you buy or hold bitcoin, know the nature and its associated risk so you won't be deceived with non-custodial wallets.

[DiMarxist]

Even at that, decentralized wallets cans still have their privacy in the transaction history. If I am using Electrum and the other is also using Electrum and I am buying something from him and I send BTC to him. Government won't know the transaction identities and it can be done secretly without anyone noticing the transaction. But for the centralized system, government is controlling them.

In my country many (exchange owners) were arrested and accounts were restricted. And as you said the best way to enjoy bitcoin transaction is the non custodial wallets and decentralized system.

[UmerIdrees]

The Agenda is real, they won't stop.

The good thing is that we have non-custodial solutions available, and it's time to shift to them if we want privacy and freedom from these restrictions and KYC stuff. I know nothing on the blockchain is private (unless you are using a privacy chain), but the government still can't control money if we use non-custodial wallets.

Anonymity and decentralization are different. While the Bitcoin blockchain may not be anonymous, you can only track the wallets without knowing the person behind them, so you can't control the movement of funds from those non-custodial wallets.

[Botnake]

Thankfully Bitcoin transaction from one wallet to another using ID won't work unless you are using Xapo like wallets (custodial).
The Agenda is real, they won't stop.

The agenda is to remove every form of privacy from cryptocurrency.

But because of how Bitcoin was built, the government are fed up already since they are not able to get what they so much desire from Bitcoin.

Who are those giving them the chances to make such decisions?

Obviously the centrally derailed investors. Those who can't simply accept the fact that these centralized exchanges are not protecting your coins, they own them. Their problems already begun when they chose to trust centralized systems.

Centralized system will always be against with any decentralized platforms. So even if no one will trust them, they will never stop in seizing the opportunity to control the bitcoin transactions or monitor them because for them, that's their real purpose. This is also another way to build connection with bitcoin holders, that even if they don't trust them, these centralized platforms will still find an access to locate bitcoin transactions.

But some people still don't get the idea with self-custody. They still trust those centralized wallets and ignore the idea of non-custodial wallets.

[terrific]

If it is with the centralized exchanges registered on their country, they'll know each transaction users do.
But if you're going to avoid them and do it in a not-registered one, will they still know it?
Because to avoid it is to not use these exchanges that they are registered with.
That is not an agenda though, we're all expecting them that they'll always regulate things.

[TastyChillySauce00]

If it is with the centralized exchanges registered on their country, they'll know each transaction users do.
But if you're going to avoid them and do it in a not-registered one, will they still know it?
Because to avoid it is to not use these exchanges that they are registered with.
That is not an agenda though, we're all expecting them that they'll always regulate things.

They won't know but they will make sure you will tell them and they will force you, they'll require you to explain where the money come from and what activities you do on unregistered exchanges otherwise your money will be seized or frozen. They requires sender ID and recipient ID exactly to identify every activity you're doing on the blockchain which defeats the purpose of the blockchain.

When government regulation comes in, it's guaranteed that they'll try to profile you and your activities on the blockchain because they always want to know about you for tax purpose of course and other motives.