FinCEN’s Proposed Rules Met with Opposition by Players in the Crypto Sector
The Financial Crimes Enforcement Network (FinCEN) recently proposed rules for the crypto sector. However, the proposed rules have not gone down well with players in the crypto sector.
In its proposal, FinCEN called for new rules regarding reporting, record keeping, customer verification, and counterparty verification. The rules would require that banks and Money Service Businesses (MSBs) collect the name and address of any customer for a transaction over $3000. Besides that, anyone who conducts a group of transactions of over $10,000 within 24 hours would also have to provide this information.
FinCEN believes that the rules would help to combat money laundering. It notes that unlike the traditional financial sector, crypto holders can transact directly with each other, which creates the potential for illicit activities. The agency believes that the rules will help to combat terror financing. It also notes that most ransomware attacks come with a ransom in crypto.
Opposition to the Rules
However, not everyone is happy with the new reporting requirement. Recently, Square wrote an open letter to FinCEN, in which it criticizes the rules. Square, which facilitates Bitcoin payments, states that the rules would only create unnecessary friction. The result would be that these customers move away from regulated crypto currency payment gateway providers to services outside the control of the US. The result is that it would be harder for US authorities to gather data on potentially illicit activity.
Square also stated that if adopted into law, the proposed rules would be unfair to those in the crypto sector. It noted that those conducting crypto transactions have to provide personal details for any transaction above $3000, those in the mainstream financial sector only have to do so for transactions above $10,000. The result is that it would only inhibit the mass adoption of crypto.
Square also noted that the rules would require them to collect unreliable data from people who had not signed up for their services. It noted that the proposal by FinCEN would not assist law enforcement officials in the effort to combat illicit financing in crypto. It would only serve to drive away customers from regulated platforms.
Square calls the proposal “arbitrary and unduly burdensome.” It notes that besides obscuring transactions further, it would also drive jobs and innovation outside the US. Square noted that they have been willingly working with law enforcement officials to combat illicit financing with great success. The company added that these efforts needed to be supported and strengthened.
FinCEN launched the proposal on December 23 and gave the public a 15-day period to submit comments. However, players in the crypto sector have officially asked the regulator to extend the period. It will ensure that they receive as much input as possible.
The rules come in the final days of the Trump administration. After that, a new person will be at the helm of FinCEN. They may decide to go ahead with the proposed rules as they are or opt to make changes. Either way, the process of enacting them into law could take months. During that time, the crypto community will have many opportunities to express its opinion.