In recent months, I’ve had periodic debates with crypto enthusiasts about an interesting topic: MPC and the future of non-custodial wallets. Old-school crypto enthusiasts believe that anonymity and control over keys are the sacred cows of cryptocurrencies. I, however, am convinced that regulators and technologies like MPC will effectively ban such solutions. I’ll explain in this article.

In simple words, the MPC wallet is a key divided between you and a trusted company. The transaction must be signed by both, in case of losing part of the key, it can be restored. Non-custodial wallets: where only you control the keys.

What I observe

  • The USA is launching ISO 20022. Formally, it is a data format for payments. In reality, it’s a filter that will determine which cryptocurrencies become part of the global financial system and which remain “outlawed”.
  • MiCA mandates the identification of anyone transferring over 1000 euros.
  • People value convenience. This is an extremely important factor. Most will prefer to “recover access via support” rather than risk losing their keys.

I’ve noticed that even providers like Fireblocks, who once positioned themselves as “non-custodial,” are now avoiding this term. Instead, they use “embedded wallet.” The idea is that your wallet is integrated into a platform with KYC, and control over the keys is technically “joint” but de-facto regulated.

Why MPC wallets are key for ISO 20022 integration? ISO 20022 requires identification of transaction participants and an audit trail. They solve these pain points and increase control over assets, which, yes, goes against the principles of Bitcoin or Ethereum.

The future of MPC in ISO 20022 is guaranteed: every wallet will be an MPC with the involvement of banks and tax authorities. Hidden consequences no one talks about: the end of decentralization. ISO 20022 requires KYC, anonymous wallets will become illegal.

The future of non-custodial

  • A gray zone. MetaMask, Ledger will evolve into shadow economy tools for P2P transfers.
  • DEXes and bridges will integrate KYC. Without MPC, you won’t be able to swap BTC for XRP.
  • RPC providers (Infura, Alchemy) will start requiring KYC for access to networks like Ethereum.
  • Liquidity pools like Aave or Uniswap will begin requiring “verified” wallets.

Maybe non-custodial will become an exception like cash in the era of digital payments. This is likely to kill the very idea of cryptocurrencies if we talk about the philosophy of 2009. But crypto has become part of TradFi, not its antithesis, governments will not relinquish control.

Bitcoin will remain “digital gold,” but it won’t enter payment systems. Its anonymity is an enemy of ISO 20022. Ethereum has a chance if zk-SNARKs and L2 solutions add support for structured metadata. I believe Vitalik is already discussing this with the BIS. Solana, Cardano could create forks compatible with the standard, but this will likely take years.