Fincen, a department of the US treasury responsible for collecting transactional information, put out a notice of proposed rule making in December: “Requirements for Certain Transactions Involving Convertible Virtual Currency or Digital”: DEPARTMENT OF THE TREASURY Financial Crimes Enforcement Network 31 CFR Parts 1010, 1020, and 1022 RIN 1506-AB47 Requirements for. This rule would require users sending $10,000+ of crypto from an exchange to an unhosted wallet to provide information on the owner of that wallet. Additionally, the exchanges would need to keep records of transactions of over $3000.
In the past, former Treasury Secretary Mnuchin said, “we’re going to make sure that bitcoin doesn’t become the equivalent of Swiss-numbered bank accounts”. So, seemingly logical.
This generated a large response from the Crypto community, with 7,000 comments being posted on the Regulations.Gov website. Example comments include:
- “Hello, I am a physician living and working in New York City, and a US citizen. This proposal needlessly burdens exchanges and individual US citizens while offering minimal, if any, benefit to tracking and catching criminals. There are easy loopholes for bad actors to use to escape recognition, but onerous requirements for people simply trying to complete their transactions. It also creates more opportunities for hacking and the release of private information. I would not like to have to worry if my name, address, and amount of money transacted are available for hackers to target because of data collection for a misguided new rule. I oppose this proposal, and urge you to reconsider.”
- “If I own gold bars, how different is that from owning a gun or owning crypto on a wallet/ledger? If anything, I totally understand KYC. But to outright band cold wallets would be taking our county backwards. I don’t need to go into long details, but for someone who is new to the space, i still think this is easily manageable to store crypto on our own”
Many of the comments came from Crypto community members. Andreesen Horowitz questioned the legality of the rule, whilst Jack Dorsey claimed they would “leave people out of participating fully in the economy”. Most critics have skin in the game.
So, on January 26th, Fincen has again extended the comment period for another 45 days. Fincen Deputy Director Michael Mosier said, asks “why does the CTR, the currency transaction reporting requirement, apply to cash and banks and money services businesses but you have this gap with crypto… There’s a concern at the senior government level, including political leaders here and abroad.”
The battle between interest groups and privacy vs freedom is not yet settled, despite the 2020 FATF regulations on virtual currencies having seemingly led to some international consensus. A significant proportion (1.1% according to Chainalysis) of crypto transactions are for illegal purposes.