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FinCEN Extends the Time to Submit Comments on the Controversial Crypto Rule

FinCEN has extended the comment period for a contentious proposed rule that would compel bitcoin businesses and banks to record and preserve client identity details for self-hosted wallets by 60 days. The Requirements for Certain Transactions Involving Convertible Virtual Currency or Digital Assets rule was proposed by the government last month, and the public comment period ended on January 15. FinCEN has extended the comment period for reporting requirements by 15 days and for record-keeping and counterparty reporting requirements by 45 days.

THE MOST IMPORTANT THINGS TO KNOW

FinCEN has extended the deadline for comments on a contentious draft rule that would force crypto firms to keep track of transactions made with self-hosted or private wallets.

The crypto community has expressed strong opposition to the law, claiming that it will stifle innovation and have legal and financial ramifications for the fledgling industry.

A Differing Opinion

For amounts over $3,000, the FinCEN rule mandates that crypto businesses and exchanges keep a record of transactions with self-hosted wallets and submit a currency transaction report (CTR) to the agency. For amounts over $10,000, the FinCEN rule mandates that crypto businesses and exchanges submit a currency transaction report (CTR) to the agency.

The rule has been met with opposition and criticism from the crypto community when it was originally suggested. Because it mandated the publication of transaction details for self-hosted wallets, or wallets that are not connected to the internet and are stored on a person’s computer or offline, civil rights lawyers contended it infringed on personal liberty.

Crypto firms, on the other hand, claimed that using private wallets would increase the expenses and labor required to maintain and trace transactions.

The fact that the regulation was pushed through its public comment period did not help matters, leading to suspicions that the goal was to have it finalized before the next administration took office. Legislators weighed in, requesting that Treasury Secretary Steven Mnuchin, who is generally credited with drafting the regulation, take industry views into account before implementing it.

Comments from a Wide Range

The regulation has already received over 7,500 comments from a diverse range of commenters in its first version, underlining the technological and legal challenges of implementing such a rule. Dr. Neha Narula, director of the Massachusetts Institute of Technology’s Digital Currency Initiative (DCI), and Patrick Murck, an affiliate at Harvard University’s Berkman Klein Center, described how smart contracts can be used to escrow and then transfer cryptocurrencies without a proper recipient in their submission.

“MSBs (Money Services Businesses) would be prohibited from supporting this entire class of customer transactions under the proposed rule as drafted. “The rule could further hem in the design and innovation of blockchain-based or cryptographic ‘digital dollars,’ whether issued by the Federal Reserve or not,” they wrote, adding that “disparate treatment” of digital and analog dollars will weaken future US central bank digital currencies (CBDCs) in comparison to other countries’ CBDC projects.”

Others discussed the ramifications of sharing sensitive consumer data with FinCEN in the wake of recent government agency intrusions. “A number of preliminary conversations with potential and actual customers indicate that they are concerned about providing detailed information to FinCEN, citing recent FinCEN security breaches as risks,” wrote Kristin Boggiano, co-founder and president of CrossTower, a global digital asset infrastructure platform.

What do you think?

Written by Trevanna Gordon

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