The Financial Crimes Network (FinCEN) has extended the comment period by 60 days for a controversial proposed rule it requires cryptocurrency businesses and banks to record and store customer identification details for self-hosted wallets. Agency Proposed Requirements for Certain Transactions Involving Convertible Virtual Currency or Digital Assets to reign last month, and its comment period ended on January 15. FinCEN has extended the comment period by 15 days for reporting requirements and an additional 45 days for a record keeping and counterparty reporting requirement.
Key points to remember
- FinCEN has extended the comment period for a controversial rule proposal that requires crypto firms to maintain a record of transactions with self-hosted or private wallets.
- The rule has generated considerable pushback from the crypto community, which claims it could stifle innovation and have legal and business implications for the fledgling industry.
A controversial rule
The FinCEN rule requires companies and crypto exchanges to maintain a record of transactions with self-hosted wallets for amounts over $3,000 and submit a currency transaction report (CTR) to the agency for amounts above at $10,000.
From the time it was first proposed, the rule has drawn criticism and backlash from the crypto community. Civil rights lawyers claimed it infringes on personal freedom because it requires disclosure of transaction details for self-hosted wallets or wallets that are not connected to the internet and reside on the user’s computer. an individual or offline.
On the other hand, crypto firms claimed that it would increase the cost and effort required to maintain and track their transactions with private wallets.
The fact that the rule was rushed through during its comment period also didn’t help matters, raising suspicions that the intention was to finalize it before the next administration takes over. Lawmakers weighed in and asked Treasury Secretary Steven Mnuchin, who is widely seen as responsible for the rule, to consider industry feedback before finalizing the rule.
A variety of comments
In its initial version, the rule has already attracted more than 7,500 comments from a wide variety of commentators, highlighting the problematic technical and legal aspects of implementing such a rule. The submission by Dr. Neha Narula, director of the Digital Currency Initiative (DCI) at the Massachusetts Institute of Technology, and Patrick Murck, an affiliate at Harvard University’s Berkman Klein Center, highlighted how smart contracts can be used to crook and then transfer cryptocurrencies without an appropriate recipient.
“The proposed rule as written would prohibit MSBs (Money services businesses) to support this entire class of client transactions. This would make transactions with CVCs and LTDAs less secure and significantly impede innovation and growth of this exciting new technology,” they wrote, adding that the “disparate treatment” of digital and analog dollars will weaken future states. United. central bank digital currencies (CBDC) compared to CBDC projects in other countries. “The rule could further impede the design and innovation of blockchain-based or cryptographic ‘digital dollars’ (whether issued by the Federal Reserve or private actors) at a time when the development of these approaches is nascent, potentially putting the future dollar at a competitive disadvantage against other sovereign currencies”.
Others have written about the implications of sharing sensitive customer data with FinCEN in light of recent hacks by government agencies. “A number of preliminary discussions with potential and actual customers indicate that they have serious concerns about providing detailed information to FinCEN, citing recent security vulnerabilities at FinCEN as risks,” wrote Kristin Boggiano, co- Founder and President of CrossTower, a global digital asset. infrastructure platform.