Author: Zhang Feng

In recent years, with the popularization of crypto assets, self-custody (i.e., individuals independently controlling private keys to manage digital assets) has become an important way to ensure financial autonomy. According to news from Jinse Finance, the latest digital asset report released by the White House explicitly supports individuals' rights to self-custody of digital assets and suggests that Congress pass legislation to confirm this right. The report also acknowledges that privacy-enhancing technologies such as crypto mixers, privacy coins, and zero-knowledge proofs, while protecting users' legitimate rights and interests, may also be misused by illegal actors for money laundering activities. Taking the Tornado Cash case as an example, federal prosecutors accused the privacy protocol of being used to launder billions of dollars, but its founder, Roman Storm, argued that he merely released open-source code and did not control how users utilized the protocol.

This report has sparked widespread discussion. Many people question: since the core of crypto assets is "private key equals control," why is there a need for legal confirmation of self-custody rights? Let's discuss this.

1. The Essential Difference Between Private Key Control and Legal Confirmation of Self-Custody Rights

The technical foundation of crypto assets is blockchain and cryptography. The private key, as the sole credential for accessing and transferring assets, is essentially a form of control over a technical means. Holding a private key means having the ability to dispose of assets in a factual sense, but whether this control equates to legal rights requires further analysis.

Factual Status vs. Legal Status. Private key control is a factual status, meaning that asset possession is achieved through technical means. For example, if someone holds a Bitcoin private key, they can independently complete transactions without third-party intervention. However, this factual control does not automatically gain legal recognition. Legal status must be clarified through statutory law or case law regarding rights ownership, protection scope, and remedies. For instance, in traditional property rights, possession of real estate must be confirmed through a registration system; similarly, if the self-custody rights of crypto assets are not legally confirmed, their control remains at the technical level, lacking institutional protection.

Legitimacy Confirmation. Private key control itself is neutral: it can be used for legitimate transactions or may involve illegal activities (such as money laundering or hacking). Legal confirmation of self-custody rights aims to distinguish between legitimate holding and illegal behavior, providing a basis for good-faith holders. For example, if the law clearly defines self-custody rights, individuals who lose or have their private keys stolen can assert their rights based on the law; conversely, if the law does not confirm this, asset ownership may face disputes and could even be regarded as illegal.

Exclusive Protection. While private key control can technically exclude others from access, it cannot address more complex infringement behaviors. For instance, when a third party obtains a private key through fraud, coercion, or technical vulnerabilities, relying solely on technical means makes it difficult to recover losses. Legally confirmed self-custody rights provide exclusive protection, including the right to prohibit others from infringing, to recover illegally transferred assets, and to request intervention from judicial or administrative authorities. This protection is similar to the "exclusive ownership" in property law, which cannot be replaced by technical control.

Judicial Remedies. If private key control lacks legal backing, it may fall into a dilemma of rights protection in disputes. For example, when self-custodied assets are illegally transferred, victims must rely on legal procedures to recover; if the law has not confirmed self-custody rights, the court may lack a basis for action and may even deny its legitimacy. Conversely, legal confirmation can provide a basis for judicial remedies, including freezing the infringing party's assets, ordering return or compensation, etc. The White House report's suggestion for Congress to legislate is precisely to fill this gap in remedies.

2. Potential Impacts of Unconfirmed Self-Custody Rights

If self-custody rights remain in a legal gray area for an extended period, not only may individual rights be harmed, but it may also hinder technological innovation and market development.

Rights Without Maintenance May Lack Legal Support. The decentralized nature of crypto assets creates tension with traditional financial systems. In many jurisdictions, the legal definition of digital assets is still unclear, and self-custody may be viewed as "informal" or "unprotected" behavior. For example, in some countries, courts may refuse to provide remedies in cases related to private keys on the grounds of "lack of legal basis." Moreover, some regulatory agencies associate self-custody with illegal financial activities, putting good-faith holders at risk of having their assets frozen or confiscated. The absence of legal confirmation effectively undermines the sense of security in private key control.

Legal Frameworks May Even Influence the Exercise of Crypto Asset Rights. Governments, in order to maintain financial stability or combat illegal activities, may introduce regulations that restrict self-custody. For instance, some countries have proposed banning privacy coins or requiring private keys to be backed up with designated institutions. While these policies aim to regulate the market, they may excessively infringe on individual property rights. If the law does not clearly define self-custody rights, individuals may be unable to counter such regulatory measures. The White House report's suggestion for Congress to legislate is precisely to ensure that regulatory goals are met while preventing excessive intrusion of public power into private domains.

Market Trust and Institutional Risk. Legal uncertainty can suppress market participation. Institutional investors and individual users may avoid self-custody due to concerns about the protection of their rights, opting instead for centralized platforms, which could lead to a repeat of the FTX collapse—where user assets were misappropriated or lost. Legal confirmation of self-custody rights can enhance market trust in crypto technology and promote the healthy development of decentralized finance.

3. Acknowledging Self-Custody Rights Does Not Mean Absolute Freedom

It is important to emphasize that legal confirmation of self-custody rights does not equate to granting individuals unlimited freedom. The exercise of any right must be premised on not infringing on the rights of others and public interests.

Prohibition of Rights Abuse. Self-custody rights should be subject to legal constraints such as anti-money laundering and anti-terrorism financing laws. For example, if individuals use crypto assets for illegal transactions, law enforcement can still restrict, freeze, or recover assets based on the law combined with relevant technical means. Legal confirmation of self-custody rights precisely provides a standard for distinguishing between legal and illegal behavior, rather than offering shelter to wrongdoers.

Balancing Public Interests. Governments have the right to implement reasonable regulations on self-custody to maintain financial stability, tax fairness, or national security. For instance, requiring large transaction declarations or cooperating with judicial investigations. The White House report also emphasizes that digital asset innovation must be premised on "responsibility," and the essence of legally confirming self-custody rights is to seek a balance between individual freedom and public interests.

Collaboration Between Technology and Law. The future of crypto assets relies on the joint evolution of technology and institutions. Private key control provides a decentralized technical foundation, while legal confirmation constructs an order framework under social consensus. The two complement each other to achieve the unity of "technological empowerment" and "rights protection."

While the control of private keys in crypto assets is indeed a manifestation of technological revolution, relying solely on technology cannot resolve complex issues such as rights ownership, legal remedies, and the balance of public interests. The White House report's support for self-custody rights and call for legislative confirmation recognizes that technological facts must be transformed into legal status to achieve true property rights protection. In the digital age, the law should not be absent from technological innovation but should actively construct an adaptive institutional framework—protecting individuals' autonomy over digital assets while ensuring that their exercise aligns with the overall interests of society. Only in this way can crypto assets transition from a technological experiment to a mature economic infrastructure.

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