The Treasury Department is looking to apply the same rules to cryptocurrency that they do to standard fiat transactions.
Treasury Department Seeks to Limit Non-Hosted Wallet Activity
The idea is to gather more information regarding the identities of those who engage in large crypto transfers and thereby potentially identify criminals and lawbreakers. Specifically, the Treasury Department is looking to potentially uncover the identities of those who may possess wallets that are not hosted by standard exchanges.
The new legislation would require the identity be exposed of any person who engages in a crypto transaction that exceeds $3,000. This is the same kind of rule that applies to standard banks, who must report data on individuals who receive wire transfers that exceed this same amount due to the new travel rule. A senior official of the Treasury Department explained in a recent interview:
The goal of what we’ve just released is really to increase transparency and reduce anonymity in the crypto space, and that’s because anonymity provides cover for lots of criminal and illicit activity.
Also, all transactions that occur through non-hosted wallets that exceed $10,000 must be reported to the Financial Crimes Enforcement Network (FinCEN) within 15 days of when the transaction occurs.
Naturally, many crypto advocates and analysts believe that the new legislation – should it be implemented – is a huge infringement on crypto traders’ privacy. Several are now working to either stop the new legislation from being considered or to delay its being turned into law. Among those working against the new regulation is Kristin Smith, executive director of the Blockchain Association. In a recent statement, she mentions:
We gathered everyone that had any contacts in government and did good old-fashioned lobbying of the Hill, of the Treasury and of the agencies to try to walk them off of that.
In addition, several Republican members of Congress – including Tom Emmer of Minnesota and Ted Budd of North Carolina – have written a letter to Secretary of the Treasury Mnuchin asking him to think twice before setting such law into stone. Many are arguing that non-hosted wallets are exactly what keeps the bitcoin space working properly, and that this lack of prying eyes keeps the industry popular.
Michelle Bond – chief executive of the Association for Digital Assets Markets – comments:
While we are still reviewing the proposal, it appears that the Treasury Department’s latest rule on self-hosted wallets could have unintended consequences, including forcing American companies offshore… and reducing our global leadership position in digital markets.
A Comment Period Will Come First
A senior Treasury official further stated:
We think we have a good sense of the industry’s views here and potential impacts, but nonetheless, we do want to have a notice-and-comment period. There is a possibility it gets finalized, but again, a decision will be made after the notice-and-comment period.
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