Bitcoin has long been heralded as a decentralized, censorship-resistant form of money, offering individuals an opportunity to take control of their financial assets. However, to fully benefit from these properties, Bitcoin holders need to understand the importance of self-custody, especially when considering historical precedents like the controversial Executive Order 6102.
This order, signed by President Franklin D. Roosevelt in 1933, made it illegal for U.S. citizens to “hoard” gold, requiring them to turn it over to the government. The implications of this event provide a cautionary tale for Bitcoiners today.
What Is Bitcoin Self Custody?
Self-custody means holding and controlling your own Bitcoin, without relying on third-party custodians like exchanges or wallets controlled by companies. When you hold Bitcoin on an exchange, you’re essentially trusting the exchange to manage your funds, much like how individuals once trusted banks to hold their gold.
However, Bitcoin was designed to eliminate this kind of intermediary reliance. With self-custody, you control your private keys, and as the famous Bitcoin adage goes: “Not your keys, not your coins.”
By controlling your private keys, you are the sole owner of your Bitcoin. No bank, exchange, or government entity can freeze, confiscate, or censor your funds — assuming you’ve taken proper steps to secure your keys.
Executive Order 6102: A Historical Parallel
Executive Order 6102 required U.S. citizens to hand over their gold to the federal government during the Great Depression, significantly undermining private property rights in the name of economic stabilization. Those who didn’t comply faced hefty fines and potential imprisonment.
While the order may seem like a relic of the past, it raises important questions about financial freedom and government intervention. If a similar event were to happen today, and if citizens were holding their Bitcoin on a custodial platform, authorities could theoretically seize or freeze those funds, especially in times of economic crisis.
The decentralized nature of Bitcoin makes this difficult, but centralized exchanges still act as potential choke points. This is why self-custody is paramount. By ensuring that no third party holds your keys, you protect yourself against similar overreach.
The Risks of Not Controlling Your Bitcoin
Failing to use self-custody exposes Bitcoin holders to a variety of risks. When you store your Bitcoin on a centralized exchange or wallet provider, you’re trusting that platform to protect your funds. However, these third parties can be hacked, compromised, or forced to comply with government regulations that could result in your Bitcoin being frozen or confiscated.
Much like how citizens lost control over their gold with Executive Order 6102, not having direct control over your Bitcoin leaves you vulnerable to seizure, fraud, or mismanagement by centralized entities.
How to Secure Your Bitcoin with Self-Custody
Getting started with self-custody isn’t difficult, but it does require careful attention to security. Here’s how you can ensure you’re in full control of your Bitcoin:
1. Use a Non-Custodial Wallet
Non-custodial wallets allow you to hold your private keys, meaning only you have control over your funds. Some popular options include:
- Hardware wallets like Ledger and Trezor, which are secure physical devices.
- Software wallets like Electrum, which allow you to control your private keys directly from your computer or phone.
You can use a Bitcoin ‘on-ramp’ like the Bitcoin Well to fund straight to your self custody wallet.
2. Backup Your Seed Phrase
When you set up a wallet, you’ll be given a seed phrase — a list of 12-24 words that can be used to recover your wallet. It’s crucial to keep this phrase secure. Write it down on paper (never digitally) and store it in a safe place. Consider using a metal backup device to protect it from fire or water damage.
3. Enable Two-Factor Authentication (2FA)
If you’re using any platform to interact with your Bitcoin, make sure to enable 2FA. While 2FA doesn’t apply to hardware wallets, it can enhance security for exchanges, software wallets, or even email accounts tied to your financial activity.
4. Avoid Public Wi-Fi and Practice Digital Hygiene
Always ensure that your devices are secure, updated, and free from malware. Avoid public Wi-Fi when managing your funds, and consider using a VPN for added protection.
5. Consider Multi-Signature Wallets
Multi-signature (or multi-sig) wallets require multiple private keys to sign a transaction, which can enhance security. This setup prevents a single point of failure, making it a strong choice for those seeking added protection.
6. Educate Yourself About Risks
Knowledge is the most important aspect of self-custody. Understand potential threats like phishing attacks, social engineering, and device security breaches. Keeping up with the latest security practices will help you stay protected.
The Importance of Self-Custody in Today’s Market
In today’s rapidly evolving regulatory environment, Bitcoin self-custody matters more than ever. As governments around the world increasingly examine cryptocurrency regulations, ensuring that your Bitcoin remains under your full control is essential for maintaining financial sovereignty.
As demonstrated by Executive Order 6102, external pressures in times of economic crisis can lead to government overreach. While such actions may seem unlikely in the modern Bitcoin era, centralized exchanges remain vulnerable to regulations or compliance mandates that could compromise your funds.
Steps to Safeguard Your Bitcoin Holdings
Self-custody is a straightforward process, but there are a few essential steps to make sure your Bitcoin is as secure as possible. By following these steps, you’ll ensure that your Bitcoin remains in your hands and out of reach of third-party actors, including governments or centralized platforms.
- Use a secure, non-custodial wallet to store your private keys.
- Back up your seed phrase and store it in a physically secure location.
- Activate 2FA and practice secure digital hygiene.
- Stay informed about the latest security practices in the Bitcoin ecosystem.
Why Self-Custody Protects You from Future Regulation
Bitcoin’s decentralized nature gives it a resilience unmatched by traditional financial systems. By practicing self-custody, you’re ensuring that no government or centralized platform can control, confiscate, or freeze your funds, even in the face of potential future regulations.
Self-custody provides individuals with the power to bypass censorship, governmental overreach, and institutional failures that could lead to the seizure of assets, much like what occurred under Executive Order 6102. By keeping control of your private keys, you’re taking full advantage of Bitcoin’s ability to resist such threats.
Final Thoughts
The controversy surrounding Executive Order 6102 is a powerful reminder of the risks associated with relying on third parties for financial assets. With Bitcoin, individuals have a unique opportunity to regain control over their wealth — but only if they understand the importance of self-custody.
By taking the steps to control your private keys, you’re safeguarding your Bitcoin against potential future regulations and ensuring that no one but you has access to your wealth. In an era where economic uncertainty is rising, self-custody is more important than ever.
Be sure to follow us on X for Bitcoin related news and opinions.
References:
Stay in control, stay sovereign, and remember: Not your keys, not your coins.