A proposal by the U.S. Financial Crimes Enforcement Network (FinCEN) that would require crypto exchanges to collect personal information, including names and home addresses, from individuals seeking to transfer cryptocurrencies into their own wallets is poorly defined and could have widespread repercussions, say a number of regulatory experts.
The proposed rule, unveiled last Friday, would require crypto exchanges to collect this personal information from customers who transfer an aggregate of $3,000 per day to “unhosted” wallets (which are also referred to by FinCEN as self-hosted or self-custodied wallets; crypto users may know them as private wallets or, simply, wallets). Transfers of over $10,000 per day would require the exchange to file a Currency Transaction Report (CTR) to FinCEN, reporting these transactions and the individuals making them to the federal government.
The proposed rulemaking, which was published in the Federal Register on Dec. 23, has quickly drawn widespread industry backlash, with complaints ranging from the document’s poorly defined terms to the rushed process itself. Comments are due by Jan. 4, cutting what would normally be a months-long public comment period to just two weeks.
The controversial rule is said to be a personal project of Treasury Secretary Steven Mnuchin, said Jeremy Allaire, CEO of USDC stablecoin co-issuer Circle. It originally was thought to be far more stringent than the final version published last week.
Further, it appears the rule is being jammed through the rulemaking process to ensure it is implemented before President-elect Joe Biden takes office next month, said Nick Neuman, CEO of bitcoin self-storage firm Casa.
The shortened comment period reduces how much time exchanges have to determine whether they need to change their internal processes to remain in compliance, said Amy Davine Kim, chief policy officer of the Chamber of Digital Commerce advocacy group. How exchanges would comply also remains an open question, she said.
“It could also cause these regulated financial institutions to pause transactions involving self-hosted wallets given the extremely short timeframe in which to consider the implications of this rule, while they implement the tools, processes and procedures to implement the requirements,” Kim said.
Several key details of the proposed rulemaking have been poorly defined, multiple individuals told CoinDesk.
Perhaps the most glaring omission: “unhosted wallets,” FinCEN’s favored term for storing one’s own crypto, isn’t actually defined in the proposed rule, both Kim and Seward & Kissel Associate Andrew Jacobson said.
“Notably, the preface of the NPRM [Notice of Proposed Rulemaking] explicitly discusses ‘unhosted wallets’ as prompting the need for the proposed rule. However, the actual language of the proposed rule does not mention unhosted wallets or define it, making the rule discordant in its explanatory language versus the actual…
Read more:FinCEN’s Proposed Crypto Wallet Rule Might Hit DeFi – CoinDesk