FinCEN, part of the US Department of Treasury, is in the process of creating rules that will impact the digital asset ecosystem. FinCEN is seeking to address the illicit activity in the “convertible virtual currency” (CVC) sector and the “anticipated growth” of “legal tender digital assets” (LTDAs). This apparent threat will be dealt by mandating new reporting requirements for digital asset transactions that are “similar to the existing currency transaction reporting requirements.” The proposal also includes heightened record keeping demands. FinCEN has allowed for a 15 comment period and, so far, more than a thousand comments have been posted. FinCEN has rushed the proposed rules in anticipation of the change in administration with President-Elect Joe Biden being sworn in later this month thus kicking in a vast transition in government.
Many digital asset industry insiders view the proposed rules as onerous and draconian that may increase costs and diminish utilization. Today, CoinFlip – a Bitcoin ATM operator, forward a copy of their comment letter with an excerpt shared below.
To quote CoinFlip:
“FinCEN’s proposed rulemaking would impose arbitrary and unnecessary burdens on virtual currency businesses—rules which would be more burdensome than those for traditional money transfers. This proposal will stifle innovation, jeopardize the economy, and hurt consumers, especially in unbanked communities, without a countervailing benefit to consumers or law enforcement.
By effectively preventing transactions in virtual currency unless businesses can verify the names and addresses of users and each person with whom users transact, the rule discriminates against the underbanked, including those with no fixed address. Further, by requiring reporting of wallet holders’ information, the U.S. government would be able to monitor a person’s real-time transactions for years into the future, with no need for a subpoena. This offers unchecked and unprecedented visibility into Americans’ financial information.
Blockchain and digital currency companies are more than just payment systems. These emerging companies are transforming insurance, supply chains, and the entire financial system. At a time when we cannot afford to lose any more American jobs or technology overseas, this rule would impose costly recordkeeping and reporting standards on small businesses – more than a million person-hours of additional work. Even if businesses find a way to meet those requirements, the agency acknowledges that bad actors will still be able to evade the rules.
The agency should withdraw these proposed rules or, at a minimum, meet the legal requirement for public notice and comment, to permit the companies that will feel the burden of this new proposed regulation a full opportunity to be heard.”