There are 2 days left for FinCEN wallet regulation to land? What is the reaction of trading platforms and capital?

On December 23, 2020, the Financial Crimes Enforcement Network (FinCEN) published a document, which involves the requirements of certain transactions that can be exchanged for virtual currency or digital assets. This document is currently in a public comment period and will be closed until 23:59 EST on January 7, 2021, at which time it may become a formal regulation.

Only 2 days away from landing, this document has aroused intense discussions in the American encryption community. The payment giant Square, the largest U.S. The trading platform Coinbase and the top venture capital a16z expressed their views one after another. Almost all institutions are opposed to the content of the document, and believe that the introduction of the regulation may hinder the innovation of the United States in the field of cryptocurrency.

Rhythm BlockBeats compiled the views of several American companies on this document.

Rhythm Note: This document is planned for December 18th and published on federalregister.gov, but the official release time is December 12 On August 23, the publication platform regulations.gov.

FinCEN New Regulatory Regulations

U.S. authorities have found that malicious actors are increasingly using exchange virtual currencies (CVCs) to facilitate international terrorism financing, weapons proliferation, sanctions evasion, and transnational money laundering.

FinCEN has assessed that, because of national security requirements, it is necessary to establish an effective program to protect national security, assist Enforcement, increased transparency, while minimizing disruption to innovation.

Rhythm summarizes three rules that have a greater impact on the market:

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-Trading users need to go through KYC verification

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-Regulated for companies greater than 3000 Record and verify non-custodial wallet user names and physical addresses for USD transactions

-Cryptocurrency trading platforms need to submit transaction information to FinCEN with a transaction amount exceeding $10,000

Institutional Viewpoint

Gemini believes the file has three major flaws

by Cameron Gemini, a digital asset trading platform founded by twin brothers Winklevoss and Tyler Winklevoss, wants FinCEN to extend the consultation period, and believes that the document has three major flaws:

First, the document is unlikely to deter illicit financial activity, instead it would have the opposite effect, potentially driving cryptocurrency activity out of the regulated confines of the well-regulated U.S. market and into the unregulated one. The proposed rule does not have strong enforcement power and would have significant detrimental effects on individual privacy.

The document, however, is full of ambiguities that would seriously undermine efforts to observe integrity and possibly adversely affect the ability of the United States to remain at the forefront of innovation.

Finally, the formulation of this document obviously lacks procedures. As drafted, all this rule can do is prompt bad actors to first systematically withdraw their cryptocurrencies from existing regulated U.S. exchanges into individual wallets, and then engage in whatever illegal activity they envision.

a16z believes the document violates the Fourth Amendment

a16z, a $300 million encrypted investment fund formed by A16Z, clearly opposed the content of the document, arguing that the document violated the Fourth Amendment and expanded business activities beyond self-hosted wallets , and the way the document was drafted was unfair.

Square believes the document limits America's ability to innovate

  Square, the payments giant founded by Twitter founder Jack Dorsey, wants FinCEN to extend the consultation period, saying the document will reduce Square's competitiveness and may increase unnecessary transaction friction, thereby limiting the ability of the United States to innovate. Once the document is passed, it may lead to the following consequences:

First create double standards for traditional financial institutions and cryptocurrency transactions

Second, the document does not address or mitigate specific risks;

Third, the document requires transaction records to be kept The claim is not supported by clear data;

The document then fails to address the inherent nature of cryptocurrency transactions and the effectiveness of existing compliance protocols;

Finally this document does not help (and potentially hinders) law enforcement efforts.

Coinbase believes that the consultation period for this document needs to be extended to 60 days

Coinbase, one of the world's largest digital currency trading platforms and blockchain comprehensive service platforms, raised objections to the 15-day consultation period and believed that it should be extended to the traditional 60 days.

Coin Center expressly opposes the document

non-profit cryptocurrency Advocacy group Coin Center explicitly objected to the content of the document, saying the short 15-day consultation period ignored and flouted public opinion. At the same time, Coin Center also believes that this process is undemocratic, irresponsible, and lacks long-term administrative procedures and rule-making norms.

Electric Capital landing may bring two new problems

Electric Capital, an encrypted asset management company, suggested that FinCEN change the consultation period to 60 days to ensure that the rules can achieve the expected goals and will not cause losses to US citizens. Electric Capital also pointed out the possible problems of the document:

On the one hand, the centralized data storage of FinCEN or the Ministry of Finance may bring Cybersecurity risk, the aggregation of this data poses a significant threat to U.S. citizens; The high-value innovative application of blockchain has caused setbacks to the interests of the United States in the global financial and technology markets.

January 7 , the consultation period for this document will expire. In the face of overwhelming opposition to the document from the U.S. encryption community, FinCEN did not make a new response. Many institutions believe that the document cannot be implemented well, and the document may also extend the consultation period due to pressure from the American encryption community. Rhythm BlockBeats will continue to pay attention to the follow-up progress of this matter.

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