Payments company Square‘s (NYSE:SQ) Jack Dorsey has expressed concerns regarding recently proposed Bitcoin (BTC) related regulations.
The bitcoin regulations proposed by FinCEN give few useful powers to regulators, greatly roll back economic freedoms while pointlessly surveilling law-abiding people, and create databases of info about who owns how much bitcoin that are easy to steal and therefore dangerous.
— Square Crypto (@sqcrypto) January 4, 2021
The proposed regulation, recommended by the Financial Crimes Enforcement Network (FinCEN), would require financial services providers, like Square, to obtain the names and physical addresses from “non-customers” for virtual currency transactions valued at over $3,000. According to Dorsey (who wrote a letter in response to the rule), these new guidelines will lead to “unnecessary friction and perverse incentives for cryptocurrency customers to avoid regulated entities for cryptocurrency transactions.”
Dorsey further noted:
“By adding hurdles that push more transactions away from regulated entities like Square into non-custodial wallets and foreign jurisdictions, FinCEN will actually have less visibility into the universe of cryptocurrency transactions than it has today.”
In October 2020, Square, which has seen its market cap increase significantly during the COVID-19 pandemic, acquired 4,709 bitcoins, valued at around $50 million at that time (and now worth $175 million+ at the time of writing).
Square has also been able to take advantage of the rise of BTC due to customers purchasing and selling the digital asset through the Fintech firm’s Cash App – which has been ranked as one of the top digital payments apps on the Apple App Store.
The proposed FinCEN regulations are aimed at preventing the illegal use of digital currencies like engaging in money laundering or potential terrorism financing and drug trafficking activities. However, Dorsey provided an example of a mother sending her daughter $4,000 in Bitcoin that could also be prohibited under these new rules.
“For example, under this Proposal — if a Square customer’s mother gifts her daughter $4,000 in physical cash and the daughter deposits those funds in a bank, the bank would have no obligation to collect information on the customer’s mother. Under the proposal, if this same transaction were completed in cryptocurrency, the bank would have to reach beyond its customer relationship and intrude upon the mother’s private information in order for the daughter to successfully deposit and freely access her gift.”
Dorsey also pointed out that these regulations might actually hurt law enforcement capabilities and the ongoing innovation in digital and Fintech platforms supporting cryptocurrencies.
In his letter to FinCEN, Dorsey added:
“This proposal, especially given the lack of proper time for meaningful review, falls short. Ultimately this will not only harm the economic empowerment of individuals and payments innovation more broadly but also diminish FinCEN’s fundamental responsibility to protect the financial system — a goal which we strongly share.”