FinCEN’s ‘Proposed Rule’ Response Period Closes; 6,537 Comments Criticize The Changes
The cryptocurrency community widely questioned the “Proposed Rule” on non-custodial crypto wallets by the US Treasury as the public comment period closed on Monday 4th January. Coinbase, Gemini, Square, and other top crypto firms were part of the 6,537 comments submitted to the Treasury – dismissing the proposed changes that would see ‘convertible virtual currencies’ or ‘digital assets with legal tender’ service providers submit reports, keep records, and verify the identity of customers concerning transactions involving crypto assets.
On December 23rd, the Financial Crimes Enforcement Network (FinCEN) released a 72-page document on the proposed requirements for running a cryptocurrency exchange to curb illegal transactions. This new rule was not well received by cryptocurrency investors, exchanges, congress members, and a Senator.
In a letter to FinCEN, Coinbase stated the period given to the public to comment on the proposed rule change was not enough. The 15-day period following the document release runs through two federal holidays and weekends – not giving ample time to the public to analyze the rules, the letter reads.
“The 15-day period violates the Administrative Procedure Act. […] Coinbase has not had enough time to analyze this Proposed Rule, let alone identify and comment on all the issues the Rule raises.”
Cameron Winklevoss, a co-founder of Gemini exchange, shared similar views to Coinbase further stating the Proposed Rule – as it is – “won’t meet FinCEN’s stated intention of stemming illicit financial activity.”
All that this rule will do is drive bad actors to first systematically withdraw their crypto from existing regulated U.S. exchanges into their personal wallets and then to proceed with whatever illicit activity they contemplated —
— Cameron Winklevoss (@cameron) January 5, 2021
The Rule is also “replete with ambiguity” which may undermine the overall compliance efforts currently in place across regulated exchanges, Cameron added. In their written statement to Treasury, Square Inc., also blasted the Proposed Rule claiming it will cause “unnecessary friction” in the industry as bad actors move away from regulated exchanges to private non-custodial wallets, which makes it more difficult to trace them.
Gemini, Coinbase, and Square also agreed that the proposed Rule is not technology-neutral – with a target on cryptocurrency exchanges. As per the Rule, if imposed, every cryptocurrency transaction above $3,000 will be subject to record-keeping, which differs from bank transactions above $3,000. Furthermore, only cryptocurrency exchanges will be required to record and report counter-party names and addresses on transactions above $10,000 to Treasury while filling currency transaction reports (CTRs).
With the current US Treasury regime on its closing days, as Biden’s team takes over, many see this Proposed Rule as a forced agenda to pass before the team leaving office. The Rule, if implemented, will introduce practical problems to the current compliance systems, while curbing the innovation across the crypto ecosystem, Cameron said.
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