Hey, for a week. Coinbase sent a signal of its intention to go public. Block.one revealed it had more than its alleged 140,000 BTC war chest. And bitcoin is still above $ 20,000 – every day adding a new snap to its longest streak.
FinCEN is hiring two policy officials to help draft regulations related to the “threats” posed by the cryptocurrency space, advise financial institutions and collaborate across government and the private sector on crypto policy. Earlier this month, he rumored that Treasury Secretary Steven Mnuchin would rush out self-sufficient wallet regulations that many believe would harm the crypto industry. The Block reported that this may require crypto companies to file a “currency transaction report” on crypto transactions over $ 10,000 that includes a self-sufficient crypto wallet. (More on this below.)
Coinbase filed preliminary paperwork to go public, starting the long way into what could be the first large Bitcoin company trading on US stock exchanges. This summer, he rumored that the company, which was last sold at $ 8 billion, would follow “direct listing” rather than the traditional bank-heavy route of an initial public offering – although Thursday’s “secret” filing offers little of clues. Messari estimates the company could fetch $ 28 billion on the open market.
The state of the chain?
Compound Labs released a white paper on Thursday detailing its plans to create Compound Chain, an application-specific blockchain that can provide money market services across multiple networks. DeFi’s protocol looks to overcome Ethereum’s high gas costs, lack of chain interoperability and other technical challenges – though there is no timeline for launch. Perhaps most importantly, it is looking to target the nascent field of central bank digital currency.
- NIC CARTER: Takes on the controversial STABLE Act, saying that nationalizing stablecoins will not improve financial access. (CoinDesk)
- AFTER $ 20K? Bitcoin’s price is cool, but its technology is radical. (CoinDesk)
- PEOPLE RECAP: The good, the bad and the DAOs only a founder could love in 2020. (CoinDesk)
- DIGITAL CONCLUSIONS: FC Barcelona defender Gerard Piqué invested $ 4.3 million at the Sorare site, the non-fun ticket. (CoinDesk)
Two weeks ago, Brian Armstrong of Coinbase threw the crypto community into a dilemma when he spoke of rumors of a possible Treasury Department measure intended to introduce oversight of “self-sustaining wallets.” The term was not entirely well known (Armstrong even included a rough definition in his late night twitter thread) but the possible after effects were immediately understood. The markets failed – then on a one month climb -.
Self-supporting crypto wallets are a key part of blockchain technology, and what many crypto purists would call the only acceptable way to store your coin. Also known as non-prison or self-custody wallets, they allow users to interact with a blockchain network and store crypto without relying on a “third-party financial institution,” to use the Amstrong term. (Unhosted) was coined by the Financial Crime Enforcement Network [FinCEN] in 2019, compared to wallets held by intermediaries.)
“We believe that this proposed regulation would require financial institutions such as Coinbase to verify the recipient / owner of the self-sustaining wallet, collecting identifying information on that party, before a withdrawal could be sent to that self-sufficient wallet , ”Armstrong tweeted at the time.
It was a broad understanding of what could do widespread, irreparable harm to a young industry. Everything from hard wallets to open finance protocols (DeFi) could potentially be affected. “It would force corporations to identify all counterparties to their users’ crypto transactions, keep logs, track movements and verify identities even before a transfer could take place,” wrote my colleagues Danny Nelson and Sebastian Sinclair.
Last night, The Block provided a snapshot under the hood of the stagnant regulation. According to an anonymous source, Steven Mnuchin of the Treasury is looking to implement a transaction reporting rule for money services businesses (MSBs) that interact with crypto wallets without replacing them. The fine details, such as if there is a transaction reporting level, are unknown.
Also still dark: When could such a regulation come into effect – supposedly from today – and will there be a period for public comment. What is important to note is that the rule does not appear to be an outright ban on unwanted wallets.
Institutions may be required to file so-called currency transaction reports to bring the kind of guidance and oversight to blockchairs as had existed in much of the traditional financial system. But many argue that it goes a step too far. For years, most crypto surveillance came in the form of ramps, such as your customer identification (KYC) requirements at exchanges. Although the FinCEN has pushed forward a “travel rule” adopted by most jurisdictions that introduce reporting requirements for “virtual asset service providers” (VASPs).
As such, whatever regulation the Treasury may lay down is part of a larger trend toward financial oversight. As Ian Allison of CoinDesk reported, blockchain analytics companies have highlighted money moving back and forth to private crypto wallets. Now, self-custody is the “next fault line for crypto regulations,” he said.
“Policy makers fear that the full maturity of these devolved protocols could foresee a future without financial intermediaries, which would hinder law enforcement’s ability to identify, prosecute and otherwise harass illegal financial networks in an environment when the effectiveness of these tools is already being challenged, ”Head of Risk Policy, Compliance and Regulation at cLabs Jai Ramaswamy wrote for Coin Center.
What is worrying, however, is that these new rules introduce an unprecedented level of oversight over our financial lives, the argument goes. As the Blockchain Association notes, when enabling peer-to-peer transactions, self-sustaining wallets are a necessary tool to maintain digital equivalents of cash. Cash has no identification requirements. Cash is also used by non-business actors. But allowing people to participate in trade and exchange freely is a net benefit to society.
In treating all digital commerce as suspect, or “high risk,” unnecessary and erroneous, the Blockchain Association argues.
“The issue is shaded, the potential implications are far-reaching, and a number of legitimate but competing interests sometimes have to be considered and balanced, such as empowering law enforcement while protecting the fundamental rights of citizens,” the association writes.