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US FinCEN proposes new regulations for encrypted wallets, requiring them to apply the Bank Secrecy Act



Key points:

The Financial Crimes Enforcement Network (FinCEN), part of the U.S. Department of the Treasury, has published proposed rules for uncustodial cryptocurrency wallets;

The rules would require money services businesses to report certain crypto transactions from such wallets to FinCEN;

FinCEN said the rules were designed to combat illegal activity.

The Financial Crimes Enforcement Network (FinCEN), an agency of the U.S. Department of the Treasury, recently proposed requiring banks and money services businesses to record transactions from private cryptocurrency wallets. Rumors that had been swirling for weeks have been settled.

It has previously been reported that the U.S. Department of the Treasury is working on regulations affecting crypto wallets. After weeks of speculation, the Financial Crimes Enforcement Network has released a proposed regulation requiring banks and money services businesses (MSBs) to record and verify information on “customer transfers to uncustodial (private) crypto wallets.” , while submitting relevant reports to law enforcement agencies.

Sources: US FDIC is studying deposit insurance for stablecoins: Jinse Finance reported that five people familiar with the thinking of the US Federal Deposit Insurance Corporation (FDIC) said that the banking regulator is studying whether certain stablecoins are eligible for its coverage. Discussions are preliminary, and it is unclear when the agency will make any policy decisions or how such changes will be communicated. [2021/10/7 20:09:49]

The new regulations will be open for public comment until January 4, 2021. The new regulations propose that "convertible virtual currency" and "legal currency digital assets" be classified as "monetary instruments" and therefore be subject to the relevant provisions of the Bank Secrecy Act (BSA). .

Under these regulations, any transaction totaling more than $10,000 must be reported to the Financial Crimes Enforcement Network under the U.S. Department of the Treasury within 24 hours, and the transaction facilitator must verify the identity of the customer; in addition, the lower $3,000 applies to many transactions threshold.

Several federal agencies such as US FDA, Treasury Department are experimenting with blockchain technology: Several federal agencies such as the US Food and Drug Administration (FDA) and the US Treasury Department have started using blockchain. Henry Francis, associate director for research in the FDA's Center for Drug Evaluation and Research, has successfully developed a blockchain-based application that automates real-time ingestion of encrypted data from many sources. Additionally, the Treasury Department’s Office of Financial Innovation and Transformation (FIT) is also experimenting with blockchain, with its first application for tracking mobile devices and a second for software license management. FIT is also working with the National Science Foundation to test whether using blockchain can improve the grant payment process. (Cointelegraph)[2020/8/30]

Second, Know Your Customer (KYC) rules apply even to private crypto wallets.

News | The US FCA issued a warning to the encryption company GMT Crypto: According to financemagnates, the US Financial Conduct Authority (FCA) stated that an encryption company called GMT Crypto pretended to be a regulated company GMT Communications Partners LLP to deceive investors. [2018/11/16]

This “targeted expansion of BSA reporting and recordkeeping obligations” aims to deter illicit finance involving cryptocurrencies, FinCEN said. The announcement reads:

“U.S. authorities have found that malicious actors are increasingly using CVCs to facilitate international terrorism financing, weapons proliferation, sanctions evasion, and transnational money laundering, while using them to buy and sell controlled substances, stolen and fraudulent identity documents, and access equipment, counterfeit goods, malware and 'other computer hacking tools, firearms and toxic chemicals'".

In particular, the announcement emphasized that there is ample evidence that "anonymity cryptocurrencies," or privacy coins such as Monero, "are inextricably linked to illicit activities."

Additionally, the proposed rule has been open for comment, and FinCEN has made it clear that this is a formality: “FinCEN believes that the notice-and-comment rulemaking requirement does not apply to this proposal because it relates to the diplomatic function of the United States, And "the public process established by the notice and comment rule is not feasible, unnecessary, or contrary to the public interest. "

These proposed changes were not entirely unexpected. Last month, Brian Armstrong, CEO of cryptocurrency exchange Coinbase, said he had heard rumors of imminent crypto wallet regulations and publicly urged the Treasury Department to reconsider:

“Given these barriers, transactions from crypto financial institutions to self-custodial wallets are likely to decrease. This would effectively create a “walled garden” for crypto financial services in the U.S., insulating us from innovation happening elsewhere in the world.”

Senator-elect Cynthia Lummis of Wyoming has made no secret of her Bitcoin holdings. Hours before the rule was released, she tweeted that the Treasury Department, under Secretary Steve Mnuchin, was going the wrong way.

“Congress is in the best position to weigh important competition policy issues. A rule passed now also has the potential to expand the BSA to new types of transactions beyond Congress’s intentions. It is also possible that a Treasury Department rule could be passed without public comment, as the Executive An oft-abused part of the Administrative Procedure Act. Transparency makes for good policy. It's that simple. Let the sun shine in, Mr Minister."

Compile: Libert


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US FinCEN proposes new regulations for encrypted wallets, requiring them to apply the Bank Secrecy Act

Key points: The Financial Crimes Enforcement Network (FinCEN), part of the U.S. Department of the Treasury.

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