On Dec 18, 2020, The Financial Crimes Enforcement Network (FinCEN), took a step closer to implementing its long-dreaded crypto wallet regulation.
What Is the Proposal?
Under the proposed rule, crypto exchanges would be obliged to make crypto users comply with know your customer (KYC) requirements when transferring their digital assets to personal wallets.
FinCEN now seems set to implement the new rule after it recently posted two job listings for crypto advisers. The professionals would assist the top policy enforcement arm of the Treasury Department in developing policy responses to cryptocurrencies.
These Strategic Policy officers would also issue advisories to liaise with financial institutions and engage in crypto policy partnerships with the public and private sectors.
Crypto advocate Jack Chervinsky confirmed in a Dec 19 tweet that FinCEN was working on drafting AML regulations for unhosted crypto wallets. He noted:
“If adopted, the rule would require regulated companies to verify the name & address of non-custodial wallet users for any transaction > $3k.”
The crypto community on Twitter largely sees the regulatory policies as harmful to the crypto space, as they would stifle the privacy of digital asset holders.
Crypto Exchanges To Identify Personal Wallets
The proposed FinCEN rule would require users wishing to send crypto from centralized exchanges to a personal wallet to provide their personal information to the exchanges.
The exchanges would then have to report all transactions greater than $3,000 to regulators, and also submit records of transactions that add up to more than $10K.
Essentially, the proposed rule increases the amount of personal data that exchanges must report to the Treasury Department, thus undermining crypto’s original promise of privacy and self-sovereignty.
FinCEN seems determined to close “loopholes” around digital currency transaction reporting and bring crypto closer in line with the traditional banking system.
The financial watchdog has long expressed its intention to impose more than just washed-down regulatory policies around crypto to stifle the ability of malign actors to use unhosted digital wallets in criminal activity.
The general public has until Jan. 4, 2021, to provide comments or feedback on the proposed FinCEN regulation that would centralize info on all crypto withdrawals with the US treasury.
Top Crypto Advocates Oppose FinCEN Proposal
Coinbase CEO Brian Armstrong was among the first prominent figures to expose plans by regulators to require exchanges to verify KYC information for recipients of crypto transfers to a self-hosted wallet. Armstrong clearly opposed the “rushed rule” that would infringe on the privacy of crypto users.
Another crypto enthusiast and senator-elect for Wyoming, Cynthia Lummis, has come out to oppose the proposed transaction reporting rule.
The senator, who recently stated that she would promote Bitcoin in congress, tweeted that she was deeply concerned about the move by regulators to govern self-hosted digital asset wallets.
I am deeply concerned that the Treasury Department is considering a hasty rule governing self-hosted digital asset wallets and the Bank Secrecy Act (BSA). (2/8)
— Cynthia Lummis 🦬 (@CynthiaMLummis) December 18, 2020