- The Financial Crimes Enforcement Network proposed new Bitcoin and cryptocurrency regulations on Friday, December 18th, at 4:20, just as Bitcoin’s price was at an all-time high.
- The US government is looking to get private digital wallet holders to identify themselves to exchanges when making transactions with Bitcoin and other digital assets.
- Comments on the proposed Bitcoin legislation are open for 15 days, including Christmas Eve, Christmas Day, New Year’s Eve, and New Year’s Day.
- Industry players and the EFF are already criticizing the government’s rushing schedule.
Bitcoin, the king of the cryptocurrency universe, has done what every hard core fan and expert said it would. Bitcoin has always reached a new peak, recently surpassing $ 24,000 for a single coin – add it to the list of strange things that happened in 2020. The achievement is more spectacular not because Bitcoin needs nearly three years topped its previous record, but that one single coin was trading for less than $ 4,000 in early March when panic fears of every single market, including cryptocurrencies, crashed.
But the outlawed US government cooked up a very unpleasant surprise for American crypto users who could ruin Bitcoin and almost all other digital currencies. And it also has the potential to harm international consumers.
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Bitcoin was developed in response to banks, which were largely responsible for the economic crash of 2008. The digital coin does not require oversight by a central bank, and transactions take place directly between individuals. Everything is recorded in a digital ledger, the blockchain, with other people “witnessing” and confirming transactions with the help of complex mathematical equations. Bitcoin does not rely on any company to work and thus provides another exciting function. It offers anonymity, making it practically impossible for anyone to track your actions online when handling a digital coin.
The same concepts apply to all other blockchain projects that come with connected digital coins.
The ability to bypass central banks is something that financial institutions may not appreciate. But that second characteristic, the anonymity, is what governments do not appreciate. There’s a good reason for that. Bitcoin can be used to fund unlawful acts, including terrorism, drug bargains, and similar acts unharmed. The vast majority of consumers are not involved in any of that, But law enforcement can’t track those who do because of those anonymity features.
The Financial Crime Enforcement Network (FinCEN) has just proposed new regulations that, if approved, would allow the US government to track down everyone who uses Bitcoin. Trump’s outgoing government is in a hurry to adopt the new measures before the Biden administration enters. Only a 15-day comment period currently open counts Christmas Eve, Christmas Day, New Year’s Eve, and New Year’s Day. The regulations were filed at 4:20 PM ET on Friday, December 18th, The Verge reports.
They are about digital wallets, which are used to store cryptocurrencies. Private wallet owners will have to identify themselves to exchanges, such as Coinbase, when they want to send more than $ 3,000 per transaction. The exchange must also collect information about two private wallet holders doing business and store all that information. In addition, daily transactions in excess of $ 10,000 will have to be reported. Exchanges will have to run banks more or less as if these regulations are adopted, which is what people developing a decentralized blockchain-based ecosystem would want.
Exchanges already encourage users to be verified by their own identification, but that is optional up to a point. Having them check personal digital wallets would add a whole layer of complexity to their jobs. Not to mention exchanges are hacked too. In addition to digital assets, hackers might also be interested in stealing more user data that could serve additional purposes.
Things can even get worse. Because the government would know who owns a private wallet, and all transactions are recorded inside the blockchain, they would have access to all transactions related to the address since the dawn of Bitcoin, or whatever coin you may be using.
If passed, the regulations could also affect international crypto exchanges and inspire similar measures by other governments.
There will be ways to hide your tracks if the transaction passes, such as setting up several private wallets to block transactions. But this would add a layer of complexity to someone’s crypto habits as well. Any mistakes arising from these complications cannot be undone. Regulated or not, blockchain transactions are still decentralized.
Coinbase is already protesting against FinCEN’s decision to allow only 15 days for comment. The exchange requires a 60 day review period. The EFF has also highlighted that the US is looking to increase its surveillance over digital transactions:
These developments are an attack on the ability to negotiate privately online and an attempt to extend the broad financial surveillance of the traditional banking system to cryptocurrency. Financial records contain a series of sensitive information about people’s personal lives, beliefs and relationships. […]
EFF is worried about the US government’s efforts to expand [financial] surveillance to cover cryptocurrency transactions.