In a January 4 letter addressed to FinCEN, payment firm Square CEO Dorsey said, if the rules are approved, cryptocurrency customers may be pushed to use unregulated services outside of the U.S. “This creates unnecessary friction and perverse incentives for cryptocurrency customers to avoid regulated entities for cryptocurrency transactions, driving them to use non-custodial wallets or services outside the U.S. to transfer their assets more easily,” Twitter CEO wrote. FinCEN’s proposed crypto regulations threaten the privacy of crypto holders.
Twitter CEO criticizes FinCEN for the proposed crypto-wallet regulations.
This would ultimately mean that FinCEN would “actually have less visibility into the universe of cryptocurrency transactions than it has today,” Dorsey added. At the same time, innovation in the U.S. would be stifled. “Technological limitations” may also make it difficult to identify and collect the counterparty information FinCEN would require, Square CEO said. The Financial Crimes Enforcement Network proposed the regulations in December, potentially requiring users to comply with know-your-customer requirements if they want to send cryptocurrency from an exchange to a private wallet. The financial agency would require personal information from the private wallet owner if the amount sent is greater than $10,000 in 24 hours.
Proposed crypto regulations are in line with FATF’s travel rule.
The Financial Action Task Force had earlier proposed crypto guidelines that included a “travel rule,” which is very similar to the FinCEN’s proposed guidelines. However, the proposed crypto wallet regulations did not sit right with the crypto community. Blockchain analytics firm Elliptic has also offered comment on the proposal, recently saying the rules could “adversely impact” the effectiveness of existing anti-money laundering and countering the financing of terrorism regulations. Coinbase said the 15-day comment period was insufficient to provide detailed feedback on the complex topic and suggested the rules were being rushed through by the outgoing administration.