The Financial Crimes Enforcement Network (FinCEN), an office in the US Treasury Department, has unveiled its proposed rules on transactions involving cryptocurrency wallets. Experts in the crypto community have wondered what the new proposed regulation means, what crypto owners should do, and what wallets are affected.
New FinCEN Rules for Crypto Wallets
The US Treasury Department announced Friday that the Financial Crimes Enforcement Network (FinCEN) has proposed new rules “aimed at closing anti-money laundering regulatory gaps for specific convertible virtual currencies [CVC] and digital asset transactions. ”The announcement came several weeks after rumors that Treasury Secretary Steven Mnuchin was rushing out regulations for self-sufficient crypto wallets before Trump’s term ended.
Mnuchin tweeted on Friday:
FinCEN proposes a rule on certain digital currencies that will protect national security, aid law enforcement and increase transparency while minimizing the impact on responsible innovation.
In its motion, FinCEN explained that it “assesses the existence of significant national security orders requiring an efficient process for proposing and implementing this rule.”
The US Treasury Department’s office added that “US authorities have found that malicious actors are increasingly using CGS to facilitate international terrorist financing, proliferation of weapons, evade sanctions, and launder transnational funds,” among other things, including ransomware attacks.
Crypto Experts Analyze Proposed Wallet Rules
A series of people in the crypto community have been commenting on the proposed rules on social media. Anderson Kill’s partner, Preston Byrne, noted that “FinCEN calls service-managed wallets like ‘Coinbase’ maintained. ‘It doesn’t use the term’ self-sustaining ‘but rather the term’ homeless ‘to refer to bitcoiners’ DIY wallets and your home goals. “
Lawyer Jake Chervinsky explained in some detail “The rule would impose new obligations on virtual asset service providers (VASPs) such as exchanges and custodians,” adding:
For deposits and withdrawals> $ 3k including non-custodial wallet, VASP would have to record the name and physical address of the wallet owner … VASPs would also have to report any deposit or withdrawal> $ 10k to FinCEN in the form of transaction report currency (CTR).
In contrast, he described “Prior to this, the Travel Rule only imposed these VASP-to-VASP transactions on record keeping and reporting requirements.” However, “Today’s proposal follows a worldwide trend of extending AML regulation to VASP-to-wallet transactions, as we have seen from Switzerland, France, and others.”
While emphasizing the challenges that VASP would face in complying with the FinCEN proposal, Chervinsky also noted that the new rule was “vague and ambiguous.” He said it raised questions such as “How exactly can VASP obtain the name and physical address of a wallet owner without a jail? How does someone prove they own a private key? What about smart non-custody contracts – who owns them? ”The Treasury Department provided a list of the information that must be collected here.
Lawyer Justin Winston Ono Wales shared his initial thoughts, recommending:
TL: DR: Take your coins off exchanges.
Matt Corallo of Square Crypto believes that “this sort of thing eventually goes horribly wrong left and right. So many KYC / AML things only affect people who are accidentally screwed up and not really criminals. ”
He further opined: “the text is already vague and it all depends on how it is enforced and how brokers / swaps respond. If it is left ambiguous and there are swaps involved, there’s little reason they wouldn’t switch off withdrawals for non-exchangers – few customers would worry. “
FinCEN Removes ‘Making Midnight Rules’
FinCEN is asking for public comments that must be submitted before January 4. However, Chervinsky explained that “A regular order calls on an agency to receive public comments for at least 60 days for ‘significant’ rules.”
He pointed out that “FinCEN gives us 15. at the end of December. With one month left before a new president takes an oath. This is called ‘making the rules of midnight.’ The solicitor continued:
The making of rules at midnight implies that an agency does not give the public a real opportunity to participate in the rule-making process, but rather to seek enforcement through a pre-determined outcome.
In his view, “Courts do not take this kindly. Midnight rules are often eliminated. ”
Boost for Self-Helping Wallets: New Rule Hurt Exchanges and Hostile Wallets
Renowned speaker and author Andreas Antonopoulos responded to FinCEN’s proposal with a series of tweets. First, he pointed out that “The bait and the big switch that FinCEN took was to unveil a new policy on ‘regulated institutions’ but to tell everyone that they regulated ‘unwanted wallets,’ that they didn’t….”
In fact, he said, “FinCEN has just announced their DEX and privacy coin incentive plan. Bullish. “He added,” Tightening the regulations on cryptocurrency exchanges will push more people into self-custody. “
The bottom line on the proposed rule, he explained, is “If you try to make payments from a regulated exchange they will need to be checked further and will report your transactions to the government,” asserting:
If you use your own wallet … they cannot and will not control or report on you … This will encourage users to withdraw immediately at exchange and often, as any money that they let accumulate in a hostile wallet because it is less liquid and more bureaucratic. .
He emphasized that the new rule “hurts exchanges and maintains wallets because they have to do more compliance work and make consumers jump through more hoops. It makes their ‘product’ look less functional than a wallet you control … because it’s less functional. “He reiterated” By regulating the main thing they can regulate, which are regulated institutions – they inadvertently make those less appealing to use and push more and more people into decentralized alternatives and self-custody. ”
He further warned: “This year it will be $ 3k. Next year they will lower it even as it is eroded by inflation. Ultimately, all transactions will need to be reported and managed. ”
Antonopoulos went on to remind everyone:
Not your keys, not your coins, your barriers to using them. Your keys, your coins, not your red tape.
US Pro-Bitcoin Senator and Other Lawmakers Fight for Better Crypto Control
Several legislators have expressed concerns about new crypto wallet regulations when rumors that the Treasury Department was planning to restrict the use of self-contained wallets.
Hours before FinCEN unveiled its proposal, pro-bitcoin U.S. Senator-elect of Wyoming Cynthia Lummis expressed her concerns in a series of tweets. Addressing primarily the rules of “governance of self-sufficient digital asset wallets and the Bank Secrecy Act (BSA),” he urged the Treasury Department to “immediately begin a transparent process to engage with Congress and industry, building consensus to drive America on. ” The Senator-elect noted that “America is in a battle for competitiveness with China and Russia for the future of finance,” adding:
I spoke to Secretary Mnuchin last week and strongly pressed him for a better way forward. Congress is best placed to weigh the competing policy issues at stake. A rule now adopted could also potentially extend the BSA to new types of transactions beyond the intent of Congress.
Lummis explained that bitcoin’s “hallmark” is the ability to conduct transactions without an intermediary. He concluded: “This promotes financial inclusion and freedom. A rule adopted at this point would be a solution to search for a problem. More pressing BSA issues exist. ”
What do you think of the proposed new US crypto wallet rules? Let us know in the comments section below.
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