US FinCEN proposes new regulations for encrypted wallets, requiring them to apply the “Bank Secrecy Act”
Key points:
The Financial Crimes Enforcement Network (FinCEN) under the U.S. Department of the Treasury has issued proposed rules for uncustodial cryptocurrency wallets;
These rules will require money service companies to report certain encrypted transactions of such wallets to FinCEN;
FinCEN says these rules are designed to combat illegal activities.
The Financial Crime Enforcement Network (FinCEN), an agency of the U.S. Department of the Treasury, recently proposed requiring banks and money service companies to record transactions in private cryptocurrency wallets. The rumors that have been circulating for weeks have settled.
It was previously reported that the US Treasury Department is formulating regulations affecting crypto wallets. After weeks of speculation, the US Financial Crimes Enforcement Network recently issued a proposed regulation that requires banks and money service companies (MSB) to record and verify the information of “customers who transfer money to unmanaged (private) encrypted wallets” , And submit relevant reports to law enforcement agencies.
The new regulations will be open for public comment before January 4, 2021. The new regulations propose that “convertible virtual currency” and “fiat currency digital assets” are classified as “currency instruments” and therefore should comply with the relevant provisions of the Bank Secrecy Act (BSA). .
According to these regulations, any transaction with a total transaction value of more than US$10,000 must be reported to the Financial Crime Enforcement Network under the U.S. Department of the Treasury within 24 hours, and the transaction service provider must verify the identity of the customer; in addition, many transactions are applicable to the lower US$3,000 Threshold.
Second, know your customer (KYC) rules even apply to private crypto wallets.
FinCEN stated that this “targeted expansion of BSA reporting and record keeping obligations” aims to prevent illegal finance involving cryptocurrencies. The announcement read:
“U.S. authorities have discovered that malicious actors are increasingly using CVC to facilitate international terrorism financing, weapons proliferation, sanctions evasion and transnational money laundering, while using it to buy and sell controlled substances, stolen and fraudulent identity documents and access Equipment, counterfeit goods, malware and’other computer hacking tools, guns and toxic chemicals'”.
The announcement specifically emphasized that there is sufficient evidence to show that privacy currencies such as “anonymity cryptocurrency” or Monero “are inextricably linked to illegal activities.”
In addition, the proposed rule has been publicly solicited for comments, and FinCEN made it clear that this is just a cutscene: “FinCEN believes that this proposal does not apply to notice-and-comment rulemaking requirements because it involves the diplomatic function of the United States. And “the public procedures established by the notice and comment rules are not feasible, unnecessary or contrary to the public interest. “
These proposed changes are not entirely unexpected. Last month, Brian Armstrong, CEO of cryptocurrency exchange Coinbase, stated that he had heard rumors about the imminent introduction of crypto wallet regulations and publicly urged the Ministry of Finance to reconsider:
“Given these obstacles, transactions from crypto financial institutions to self-custodial wallets may be reduced. This will effectively create a “walled garden” for crypto financial services in the United States, isolating us from innovations happening elsewhere in the world.”
Senator-elect Cynthia Lummis of Wyoming made no secret of her Bitcoin holdings. A few hours before the rules were released, she posted on Twitter that under the leadership of Secretary Steve Mnuchin, the U.S. Treasury Department was reforming in the wrong way.
“Congress is best suited to weigh important competition policy issues. A rule now passed may also extend the BSA to new types of transactions beyond the congressional intent. Treasury regulations may also be passed without public comment, as in the “Administrative The frequently abused part of the Administrative Procedure Act. Transparency creates good policies. It’s that simple. Let the sun shine in, Mr. Minister.”
