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Ultimate Resource On Hosted And Self-Hosted Crypto Wallet Regulation

Brian Armstrong is worried the Trump Administration is about to send the cryptocurrency industry a parting gift. Ultimate Resource On Hosted And Self-Hosted Crypto Wallet Regulation

The Coinbase CEO took to Twitter Wednesday night to blast the U.S. Treasury Department’s rumored plans to attempt to track owners of self-hosted cryptocurrency wallets with an onerous set of data-collection requirements.

If the whispers are to be believed,  outgoing Treasury Secretary Steven Mnuchin is preparing to tamp down on one of the fundamental tenets of the cryptocurrency ethos: the ability of the individual to hold their crypto (unmolested) themselves.

“This proposed regulation would, we think, require financial institutions like Coinbase to verify the recipient/owner of the self-hosted wallet, collecting identifying information on that party, before a withdrawal could be sent to that self-hosted wallet,” Armstrong tweeted.

If true, the regulation would represent a broadside against the U.S. cryptocurrency industry like few ever levied by the federal government. It would force corporations to know every counterparty to their users’ crypto transactions, keeping logs, tracking movements, and verifying identities even before a transfer could take place.

It would also bring to pass the worst-case scenario envisioned by industry players when the Financial Action Task Force (FATF), an intergovernmental body, told its member countries to apply the so-called travel rule to crypto businesses last year.

This long-standing rule requires financial institutions to collect information about the sender and receiver of a money transfer.

But it was ambiguous what that would mean when someone sends bitcoin  from, say, their Coinbase account to an address controlled by a private key on a sheet of paper kept in a sock drawer.

The Treasury Department did not immediately respond to a request for comment.

Widespread Impact

And it would not just affect those who store their coins on a hardware device like Trezor or Ledger. Many crypto services use non-custodial wallets. Decentralized finance (DeFi) smart contracts. Software wallets, paper storage. All would need to prove their provenance to transact with regulated entities under the rumored rule.

Such a sweeping interpretation of FATF guidance has already been applied in Switzerland and the Netherlands. There, virtual asset service providers (VASPs) must prove the ownership of non-custodial crypto wallets ahead of transfer.

Armstrong said Wednesday that such a regulation “would be a terrible legacy and have long-standing negative impacts for the U.S.”

“This additional friction would kill many of the emerging use cases for crypto. Crypto is not just money – it is digitizing every type of asset,” he said.

To date, regulation of decentralized cryptocurrency networks had been mostly limited to the on/off ramps between the networks and the traditional finance system, according to Jacob Farber, partner at blockchain law and consulting firm Ouroboros LLP.

This state of affairs left the industry “mostly unregulated” and private, such that it has been able to offer a real alternative to traditional finance, Farber said.

“Imposing a KYC [know-your-customer] requirement on transactions between on/off ramps and every wallet that transacts with them expands the reach of regulation over crypto exponentially,” Farber added. “More importantly, it changes what crypto can be, at least at scale.”

He called Armstrong’s concerns justified and said these potential regulations should be taken seriously by the cryptocurrency community.

Preemptive Strikes?

Armstrong’s tweets appeared to break long-simmering industry fears over this kind of regulation into full public view.

In recent days, multiple cryptocurrency lobbyists and advocacy groups have staged what in hindsight appears to have been a soft influence campaign to shape public opinion of non-custodial wallets.

Coin Center published a think piece on the “unintended consequences” of non-hosted wallet restrictions on Nov. 18.

The Blockchain Association, which Coinbase abandoned this year, released a 50-page policymakers’ guide to self-hosted wallets around the same time.

“The Blockchain Association has long been aware that some regulators in the U.S. and overseas have concerns about self-hosted wallets,” Executive Director Kristin Smith told CoinDesk. “We are actively educating officials in both the executive branch and the legislative branch in order to address misconceptions about self-hosted wallets.”

Coinbase Preemptively Rebuts Unpublished New York Times Expose

Cryptocurrency exchange Coinbase has publicly shared an internal letter pushing back at an as-yet unpublished article in the New York Times that, it says, will allege Black employees had “negative experiences” while with the firm.

The letter, posted on the company’s blog Thursday, states that NYT journalist Nathaniel Popper has been interviewing current and former staff over recent weeks and will “allege that a number of Black employees and contractors referenced in the story filed complaints with the company.”

Coinbase Writes:

“In reality, only three of these people filed complaints during their time at Coinbase. All of those complaints were thoroughly investigated, one through an internal investigation and two by separate third-party investigators, all of whom found no evidence of wrongdoing and concluded the claims were unsubstantiated.”

The letter, which was not signed but references the first person in places, appears to be an effort to take the sting out of the report by controlling the narrative before it’s even started. “We provided several written, on-the-record statements to The Times. We have no control over whether and how The Times uses those statements (in whole or in part) in the story,” Coinbase says.

The letter goes on to say that, despite the firm’s “best efforts” to provide relevant information to Popper, Coinbase expects “the story will paint an inaccurate picture that lacks complete information and context.”

“Finally, let me be absolutely clear on these points: We are committed to maintaining an environment that is safe, supportive and welcoming to employees of all backgrounds,” the unnamed writer (possibly CEO Brian Armstrong) says. “We do not accept intolerant behavior. And we are committed to the refreshed Belonging, Inclusion and Diversity strategy we rolled out earlier this quarter.”

The New York Times will publish the article in print on Sunday and possibly before that in online versions, according to the post.

A Second PR Blow For Coinbase

The anticipated article and the firm’s preemptive response are now building to be the second major PR blow for Coinbase this year, after a controversial blog post from Armstrong in the summer set out that he would effectively bar most political activism in its workplace and focus on the “mission.”

The missive apparently came about after internal protests were sparked when the CEO would not publicly back the “Black Lives Matter” movement, but would state that “black lives matter.” He later compromised in a tweet.

At least 60 people took the opportunity to leave in September, including several executives, after Coinbase offered severance packages to staff unhappy with the new stance.

Updated: 11-27-2020

Industry Pros Weigh In On Rumors of New Crypto Wallet Regulations

Recent rumors about U.S. regulation of private, self-hosted crypto wallets have some compelling context.

For example, the proposal submitted last month by U.S. authorities to lower the anti-money laundering (AML) threshold for cross-border transactions (its consultation ends today, Friday), seems to support the hypothesis that outgoing Treasury Secretary Steven Mnuchin is rapidly making more rules around crypto.

The Financial Crimes Enforcement Network (FinCEN) and the Federal Reserve’s rule change proposal would reduce the threshold from $3,000 to $250 for AML compliance for any transfers – in crypto or fiat – that go outside the U.S.

Concerns over user privacy in relation to that proposed change are nothing compared to the outright fear created by Coinbase CEO Brian Armstrong’s tweets about the threat to self-custodied wallets, a central tenet of crypto.

Shortened Response Period

It’s worth pointing out that the Notice of Proposed Rulemaking for the $250 threshold was given just a 30-day response period, when normally the industry would be granted 60 or 90 days. Another interesting rumor is that these stronger rule changes are coming directly from political appointees, rather than long-term career people at FinCEN or on the policy side.

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“Many of the people at FinCEN are career people who are going to be at FinCEN 10 years from now, and they have a slow and steady process that works really well for them,” said Justin Newton, CEO of Netki, a technical solution for crypto AML compliance. “Mnuchin has until January 20, to get done the things he wants to get done.”

This is borne out by the brisk 30-day period for response to the recent Travel Rule change, said Newton, which “could be because they’re trying to get this done before Mnuchin leaves.”

Another Travel Rule solution builder, Joseph Weinberg, co-founder of the Shyft Network, said the industry and its various regulators are in an “educational phase” and considerations around unhosted wallets should be carefully measured.

“It would surprise me if something came out really quickly,” Weinberg said. “A big knee-jerk reaction isn’t something that should happen because people are realizing that if we work together we can solve these problems. There are different ways of approaching this than just throwing a 1980s version of SWIFT at crypto to figure out in a year.”

Self-Hosted Crypto Wallets

It’s important to be clear about what regulators likely mean when they talk about unhosted or self-hosted wallets and how that relates to the global recommendations of the Financial Action Task Force (FATF).

This involves creating a compliance bridge between wallets hosted by a virtual asset service provider (VASP) and an unhosted or private wallet. (Technically speaking this is not the same as the Travel Rule, where there are VASPs at either end of the transaction.)

Adding a due diligence requirement around unhosted wallets is in some way equivalent to sanctions screening in the traditional financial world, said Netki’s Newton. “It doesn’t matter if the other end of a transaction is a bank, a VASP, the corner store or Uncle Bob, sanctions apply to every transaction that occurs,” he said.

Another point to note is that the U.S., were it to enact some self-hosted wallet regulation, would not be the first country to do so.

In Switzerland, the Financial Market Supervisory Authority (FINMA) introduced guidelines in January 2020 requiring exchanges to implement travel rule requirements on transactions over $1,000 and where the ownership of non-custodial wallets must be proven.

Right Fit For FATF?

The issue of private wallets has been at the forefront of the FATF agenda this year, with substantial liaison with the private sector through its Virtual Asset Contact Group (VACG), said Malcolm Wright, advisory council chair at industry trade group Global Digital Finance.

Meanwhile, the U.S. has long been an early adopter of cryptocurrency legislation which has provided foundational steps for the maturity of the industry, he said.

“If the rumors Brian Armstrong has flagged are true, we would hope that the administration will engage with industry, as the FATF has done through the VACG to ensure the impact and shape of any proposals are right-fit rather than preventative for responsible innovators,” Wright said.

Certain sections of the 12-month review provided by FATF this summer (paragraphs 53 and 54) hinted at the path ahead regarding unhosted wallets.

In addition, the Financial Service Agency of Japan (JFSA) who is leading the FATF working group on virtual assets has discussed the issue of lack of identity information on non-custodial wallets, said Dave Jevans, CEO of blockchain analytics firm CipherTrace.

CipherTrace has been meeting with FinCEN, Treasury and FATF since 2019 on the virtual asset recommendations, and travel rule in particular, Jevans said.

“There has been chatter about this over the last 2 weeks,” he said. “Our view is that forcing a ‘Swiss+’ model is a bad idea. This is where VASPs cannot send or receive funds from non-custodial wallets without some form of KYC declaration. This makes it more difficult for people to manage their own money, and to send money to businesses or family. It is a shortsighted move that will not stop criminals, since they will simply use layering techniques to get around these controls.”

Banning Crypto

Summing up, Siân Jones, a partner at XReg Consulting and the driving force behind a FATF-compliant messaging standard for crypto, said the rumored U.S. regulations were “entirely plausible.”

“The U.S. is the most vociferous around the FATF table,” said Jones. “Much of the rules are driven by the U.S., which has been pushing hard for a fairly strict regime. The policymakers there, largely the same people, are also pushing for this kind of thing. They still say, ‘if we’re not satisfied with this, we can ban it.’ And they’re the only country really that talks in those terms.”

Jones pointed to the linguistic nuance, whereby FATF refers to “unhosted wallets,” while everybody in the industry refers to them as “self-hosted wallets.”

“I think that itself is quite a revealing point,” Jones said. “To the policymakers, they see this as unhosted, uncontrolled, and stuff that is unregulated; that’s where the ‘un’ comes from. People in the industry see this as some self-possession thing, and therefore very different.”

The Treasury Department did not return requests for comment by press time. A FATF representative said it does not comment on rumors.

Updated: 12-09-2020

Congresspeople Tell Treasury To Back Off Of Rumored Self-Hosted Wallet Ban

Congressman Davidson, in particular, sees potential Treasury action as a bad idea for everybody involved.

Several members of Congress have voiced opposition to a rumored blockade on self-hosted crypto wallets in the works at the U.S. Treasury.

In a Dec. 9 letter addressed to Treasury Secretary Mnuchin, four members of the Congressional Blockchain Caucus wanted answers for rumored Treasury rulemaking that would restrict self-hosted wallet usage in the U.S.

The Authors — Warren Davidson, Tom Emmer, Ted Budd And Scott Perry — Argue That Such Limitations:

“Would hinder American leadership and preclude meaningful participation in the technological innovation currently underway throughout the global financial system.”

Speaking to Cointelegraph, Davidson noted that Treasury rulemaking is likely more dangerous than last week’s STABLE Act, that seeks to lock down on independent operators of stablecoins. The Ohian congressman said: “Mnuchin actually has a lot of power to make policy through rulemaking, so that’s actually more pressing.”

Davidson Continued To Argue In Favor Of The Benefits Of Self-Hosting And P2P:

“The real issue is, self-hosted wallets are useful for all sorts of potential blockchain applications. So the ability to move a token without an intermediary is an essential element of true blockchain. If you look at a frictionless system, part of the Bitcoin whitepaper that made blockchain famous and growing as a technology is the ability to do something peer-to-peer. It’s a core tenet of the technology.”

Today’s letter argues that crypto technology is actually helpful for law enforcement looking to trace illicit usage:

“Such a regulation could actually undermine the Treasury Department from stopping illicit actors from exploiting the financial system, both within the traditional banking system and the digital asset ecosystem.”

Updated: 12-10-2020

Circle CEO Joins Appeal Against US Treasury Self-Hosted Crypto Wallet Ban

The crypto industry and regulators need time to collaborate on better regulations.

Jeremy Allaire, CEO and co-founder of peer-to-peer payments firm Circle, sent a letter to senior staff of the United States Department of the Treasury on Dec. 9, appealing for regulators to collaborate with the industry in adopting crypto regulations.

Allaire warned U.S. regulators that some of its proposed rules pose a direct risk to the country’s competitiveness and could potentially trigger unintended consequences around crypto and blockchain-related use cases.

The exec specifically referred to a new proposal to prohibit so-called unhosted or self-hosted wallets. Allaire argued that the proposal does not address actual risks in the industry:

“I believe the proposal would inadequately address the actual risks that are at issue, would significantly harm industry and American competitiveness, would continue to yield economic and industry advantage to Chinese firms, and would have significant unintended consequences around the broader use-cases for this technology.”

Allaire also said that both the industry and regulators need some time to sort out best practices in regulating emerging technology together.

“The industry needs time, probably 1-2 years, to put these kinds of technologies in place,” he said, “Not only does the industry need this time, but this will allow the industry and financial regulators to collaborate together on building the rule sets and supervisory schemes that make sense in this new world.”

Allaire joins several members of Congress including representatives Warren Davidson and Tom Emmer, who opposed the rumored ban on self-hosted crypto wallets in an official letter to the Treasury on Dec. 9.

Some crypto advocates have stated that they are not sure what a “self-hosted wallet” means. “I don’t even know what a self-hosted wallet is. I only know ‘not my keys,’ and ‘my keys,’” Blockstream chief strategy officer Samson Mow said on Dec. 9.

Updated: 12-18-2020

Coinbase Reportedly Taps Goldman Sachs For IPO

The exchange’s ties to Goldman Sachs go all the way back to Fred Ehrsam, who co-founded Coinbase in 2012 with Brian Armstrong.

Digital currency exchange Coinbase has reportedly approached Goldman Sachs to lead its upcoming initial public offering — a move that could bolster the appeal of cryptocurrencies to a broader mainstream audience.

Citing two sources familiar with the matter, Business Insider reported Friday that Coinbase is looking to Goldman Sachs to handle its public filing. No additional details were provided.

Coinbase has been linked to Goldman Sachs through Fred Ehrsam, the exchange’s co-founder who previously worked at the bank as a trader. Business Insider reports that Ehrsam worked at Goldman between 2010 and 2012 before establishing Coinbase with current CEO Brian Armstrong.

Ehrsam left the exchange in 2017 but maintains a board position.

The report surfaced a day after Coinbase confirmed its intent to go public in a draft registration sent to the Securities and Exchange Commission, or SEC. Based on its latest valuation in 2018, Coinbase was worth $8 billion. Crypto analytics company Messari says Coinbase could be worth $28 billion after its public offering.

Coinbase is the preferred exchange of many newcomers to the digital currency space. The platform has also raked in billions of dollars in institutional capital since the spring, which broadly coincides with the arrival of so-called smart money.

Institutional investors have likely been the primary catalyst behind Bitcoin’s (BTC) record-breaking rally thus far. The flagship cryptocurrency catapulted toward $24,000 on Thursday en route to new highs.

FTX Seeks To Launch Coinbase Futures Market Ahead of Public Listing

Cryptocurrency exchange FTX is “working on” a pre-listing futures market for Coinbase after the U.S.-based exchange announced its S-1 filing Thursday.

In a direct message with CoinDesk, FTX CEO Sam Bankman-Fried said his team has plans to offer Coinbase futures once it gains clarity from regulators, which is not assured.

FTX is currently in discussions with Munich-based financial firm CM-Equity to gain regulatory clarity from non-U.S. authorities on if or how the market could launch. FTX first partnered with CM-Equity for compliance reasons when launching its tokenized stock spot and futures markets in October.

Bankman-Fried’s plans for Coinbase futures likely won’t surprise FTX users given the exchange’s large portfolio of other novel and rapidly launched markets, including presidential election prediction markets and bitcoin hashrate futures.

FTX also launched a pre-IPO market for Airbnb the day before the online vacation property marketplace’s Dec. 10 stock trading debut.

As with its other markets, however, FTX would prohibit U.S.-based traders from accessing Coinbase futures, if launched, even though the San Francisco-based exchange’s trading debut is expected on an American stock market.

Without regulatory clarity, when Coinbase futures would launch is a wide open question.

Bankman-Fried said his team will probably launch the market as soon as they receive positive legal clarity. But that “could be very soon” or it “could also never happen.”

Updated: 12-22-2020

FTX Coinbase Futures Soar 140% In First Hour Of Trading

Cryptocurrency traders showed their excitement for FTX’s pre-IPO Coinbase (CBSE) futures Tuesday morning by pushing the price above $295, a roughly 140% increase from the listing price of $125.

* Newly launched Coinbase futures reported over $2.2 million in traded volume at last check, barely 12 hours after the market opened, making it the largest tokenized stock market on FTX by a significant margin.

* The next largest tokenized stock market on FTX – Moderna (MRNA) – reports barely $800,000 in volume.

* On Friday, CoinDesk first reported that FTX had plans to launch Coinbase futures, pending non-U.S. regulatory approval. The maverick exchange also launched a pre-IPO market for Airbnb futures earlier this month.

* Coinbase futures have retraced some of their initial gains, dropping to $235 at last check, up roughly 95% from the initial listing price.

* Based on current trading, FTX’s pre-IPO futures assign Coinbase a rough market capitalization of over $58 billion, more than double the $28 billion value estimated by Messari in a Friday report.

Messari Values Coinbase At $28 Billion Following IPO Filing

Potential listing could provide a valuation anchor, not only for future crypto IPOs but also for crypto-native exchange tokens.

Following cryptocurrency exchange Coinbase filing a draft registration for a public offering with the United States Securities and Exchange Commission yesterday, research company Messari has valued the company at $28 billion.

Messari’s model examined the company’s various business segments, such as trading, custody and debit cards, to come to this figure.

Coinbase is one of the biggest exchanges worldwide, with daily trading volumes of over $1 billion. Assets under custody have grown to $20 billion from $7 billion in 2019.

A previous fundraising round in August 2017 saw Coinbase’s valuation break the $1 billion mark, gaining it unicorn status. The most recent round gave the company a value of $8 billion in October 2018.

An August 2020 report from research company Hurun had not updated this $8 billion figure, despite increases in daily trading volume and assets under custody.

On providing its latest $28 billion valuation, Messari’s analyst noted the significance of such a major IPO in the crypto space:

This listing is important even for Token valuations as Coinbase will provide a valuation anchor — not only for future equity listings — but also for crypto-native exchange tokens.

Meanwhile, an unconfirmed report claims that Teeka Tiwari’s Palm Beach Research Group has predicted a future valuation of $242 billion for DeFi platform Synthetix.

The alleged buy notice for Synthetix (SNX) tokens “conservatively” estimates that the decentralized exchange could “command a premium five times higher than traditional exchanges,” or roughly ten times Messari’s current valuation for Coinbase.

A target valuation of $2,192 per token would represent a return of over 41,000% on today’s price.

Twitter commenters noted that the company has made similar predictions that did not come to fruition in the past.

Updated: 12-17-2020

The Coinbase IPO Is Coming, According To SEC Filing

Coinbase has sent draft registration to the SEC, leaving a future IPO in the commission’s court.

One of crypto’s most-anticipated initial public offerings is one step closer.

On Thursday, Coinbase announced that the firm had sent its draft registration for a public offering to the Securities and Exchange Commission. The company wrote that:

“The Form S-1 is expected to become effective after the SEC completes its review process, subject to market and other conditions.”

Per its last valuation, Coinbase was worth $8 billion, but that was in 2018. As it stands, the firm is one of the biggest names in crypto and has a reputation for working well with U.S. regulators, two factors that have long put Coinbase as one of the frontrunners in the race for crypto’s major IPOs.

Though the draft is still awaiting review, Coinbase has been eyeing an IPO for some time. Indeed, the whole crypto industry has been waiting for shares in any of the major exchanges to see public trading, but the rigors of SEC registration and the rich ecosystem of private investment have stalled that process.

ASIC manufacturer Canaan Creative is maybe the most noteworthy crypto-centric firm to trade publicly, but its shares have seen lackluster performance since its IPO just over a year ago.

As of publication time, Coinbase had not responded to Cointelegraph’s request for comment.

Coinbase Global Inc., the largest U.S.-based cryptocurrency exchange, said it has filed with the Securities and Exchange Commission for an initial public offering, the first major bitcoin-focused company to test the public markets.

The company disclosed the news in a blog post Thursday afternoon.

The filing positions San Francisco-based Coinbase to be one of the first big IPOs of 2021, in what is expected to be another big year for companies going public.

There are a smattering of small crypto-based companies that trade publicly in the U.S. and overseas, but none the size of Coinbase, which was most recently valued at around $8 billion. It is the largest U.S.-based cryptocurrency exchange by trading volume and one of the largest crypto exchanges in the world.

Coinbase’s IPO filing comes just a day after bitcoin topped $20,000 for the first time in its 12-year history. The digital currency’s value has nearly tripled in 2020.

In a brief blog post, the company said it confidentially filed a draft registration statement with the SEC, which would become effective after a commission review. It also said the offering would be subject to market conditions and other considerations.

Bitcoin has begun to win mainstream acceptance this year. Investors including Paul Tudor Jones and Stanley Druckenmiller and companies such as Massachusetts Mutual Life Insurance Co., or MassMutual, have disclosed bitcoin holdings in recent months. Other companies including Square Inc., PayPal Holdings Inc. and Robinhood Markets Inc. have opened up their platforms to crypto trading.

That has helped bitcoin become one of the top-performing assets of 2020, though the market is still small in relative terms.

Indeed, Coinbase is cashing in on another hot trend in the capital markets: IPOs have raised more than $160 billion this year on U.S. exchanges, exceeding the heights of the dot-com boom in 1999. And investors are seizing on hot stocks: DoorDash Inc.’s shares rose 86% on its initial day of trading earlier this month. Airbnb Inc. shares more than doubled a day later.

Coinbase declined to comment.

Coinbase’s filing is the culmination of the yearslong development of both the company and the cryptocurrency industry, moving from an anarchist experiment in alternative money to a mainstream asset class that has attracted hedge funds, mobile-money providers and insurance companies.

Coinbase, founded in 2012 by Brian Armstrong and Fred Ehrsam, has grown into one of the most recognizable names in the cryptocurrency industry. It currently has about 35 million users, more than Charles Schwab Corp.’s platform.

From the start, the company’s focus cut across the grain of the small group of enthusiasts who were involved in bitcoin. Where most were looking to build a platform that sidestepped banks and government control, Coinbase consciously tried to build a company that would attract mainstream investors and would meld with the existing financial system.

Coinbase’s other goal was to make bitcoin accessible to people who weren’t coders or technically inclined. The platform has a simple user interface, but more importantly handles the job of being a custodian for the assets. That is a key point in bitcoin, which is rife with stories of individual investors losing the “keys” to their digital wallets, and permanently losing access to their bitcoin.

While it is generally assumed that Coinbase is a profitable company, it has never disclosed any profit or revenue figures. A public filing should shine a light on the company’s operations and the degree to which bitcoin is a profitable industry for the companies that have built support services for it.

A public offering could be a big payday for the company’s founders and owners. Coinbase has raised $547 million in the private market and was valued at $7.7 billion in 2018, according to Crunchbase. Its investors include Andreessen Horowitz, Union Square Ventures, BBVA Ventures and USAA.

Early on, Coinbase sought to cooperate with regulators. In 2017, it was granted a “Bitlicense” from the New York Department of Financial Services to operate its exchange in New York. It is licensed to operate in 44 U.S. states and the District of Columbia. Its platform is accessible in more than 100 countries outside the U.S.

That choice helped the company grow, but it was a double-edged sword: Coinbase was involved in a yearslong fight with the Internal Revenue Service, which in 2016 demanded access to every Coinbase user account. After two years of fighting the order in court, Coinbase eventually provided access to a small number of accounts in 2018.

The company also has found itself embroiled in other controversies this year. In September, amid nationwide protests over police brutality and institutionalized racism, Mr. Armstrong published a blog post saying the company wouldn’t engage in societal or political issues, but would remain focused solely on building products.

It offered buyouts to employees who disagreed; about 60 left the company.


Rumored US Crypto Wallet Restrictions: A Step Toward Financial Exclusion

Without proper crypto regulation, the U.S. government might create a massive roadblock to financial inclusivity.

The crypto community has a saying: “Not your keys, not your coins,” which means that if you hold your crypto on a third-party custodial wallet, you don’t truly have ownership of the coins. The entity controlling the private key of the wallet ultimately has power over it. Self-hosted wallets, or non-custodial wallets, allow individuals to receive, send and store their own cryptocurrency without the need of a custodial entity.

As life has become increasingly more digitized, the use of cash for transactions and as a store of value has declined considerably. For those in our economy with access to digital resources, online transactions and money services have taken over. However, many individuals stuck in the cash economy do not have the luxury of shopping online or making use of the efficiency of digital transactions.

According to the Federal Deposit Insurance Corporation’s 2017 survey of unbanked and underbanked households, approximately 6.5% of households in the United States do not hold an account with an insured financial institution. Almost 19% of households are underbanked, meaning that while they hold at least one account at an insured institution, they still utilize financial products, such as payday loans or cash-checking services.

Reasons for these individuals being underbanked can vary from past financial mistakes, a lack of trust in financial institutions, not having enough money for the minimum balance, or wanting to avoid fees. These reasons remained relevant two years later, according to the FIDC’s 2019 survey, where a lack of trust is among the top reasons.

Self-hosted wallets create the value thesis of cryptocurrencies. They allow anyone secure, equal access to a large and growing amount of financial tools, such as DeFi or staking, enabled by blockchain technology. Individuals with these wallets are able to access these tools and securely send money without a third-party intermediary — an impossible feat before the invention of Bitcoin (BTC).

These peer-to-peer transactions do not require an intermediary entity because the act of “cutting out the middleman” is what enables the unparalleled efficiency and financial equality that cryptocurrency provides.

By potentially regulating the use of self-hosted wallets, the U.S. government would be creating a barrier for these underbanked and unbanked individuals from accessing cryptocurrency and hindering the greatest catalyst of financial inclusivity the world has ever seen. At the same time, they would also be giving more power to intermediaries in the cryptocurrency space.

An internet connection is all that is needed to interact with the global financial system. This is a huge step forward in providing financial freedom to all, making financial services available to the billions who currently lack access. By removing this feature, the government would be rendering cryptocurrency useless to Americans without the specified identification.

In addition, wallets aren’t just digital bank accounts — they’re digital safes. A self-hosted wallet allows people to store all types of digital assets from important documents to tokenized real estate to fiat-tethered cryptocurrencies. Taking away an individual’s right to own their own physical safe would be ludicrous. Taking away the right to own a digital safe is tantamount to an infringement on the rights of Americans.

Cryptocurrency has seen more growth and created more wealth than any other invention in recent history. The U.S. is at the forefront of this boom and has seen immense growth of many companies, the creation of thousands of new jobs and greater financial independence of its citizens as a result.

Imposing a regulation that requires wallets to be custodial would put the U.S. behind the eight-ball by stifling innovation and hindering widespread adoption. While other countries continue to use cryptocurrency in its fairest and most streamlined form, the U.S. would be throttling the growth that cryptocurrency’s free market facilitates.

The blockchain ecosystem is still in its infancy, and its true potential hasn’t even been close to realized. Regulating such an important aspect of this new and useful technology would have disastrous repercussions on innovation within the crypto space, likely preventing the future invention of revolutionary products and services that will live on the blockchain.

A clear and concise regulatory framework is something the cryptocurrency industry needs, but this is not the approach to take. When creating new regulations, the U.S. government must collaborate with industry professionals and scholars to find a solution that creates strong consumer protections, stimulates innovation and ensures that all cryptocurrency users have secure access to essential financial services.

Self-Hosted Bitcoin Wallets Become Front Line In Fight Over Crypto Regulations

The Takeaway:

* Blockchain analytics companies tend to flag funds moving to and from private crypto wallets, with self-custody said to be the next fault line for crypto regulations.

* One such firm, CipherTrace, has examined privacy coins such as zcash (ZEC, -3.06%), as well as non-custodial and peer-to-peer exchanges like ShapeShift, LocalBitcoins and Paxful.

* CipherTrace acknowledges compliance standards are evolving over time, having recently upgraded scores for ShapeShift and Paxful.

* Still, looming regulatory action in the U.S. could soon require due-diligence on self-hosted wallets.

Regulated crypto is close to crossing the Rubicon – and we’re not talking about the next price breakthrough.

The steady creep of know-your-customer (KYC) requirements over firms that touch digital assets is now at the foot of private, self-hosted wallets.

This move, which begins with regulated exchanges being required to do due-diligence on non-custodial wallets they connect to, is already underway in places like Switzerland and Singapore, with the U.S. rumored to be next.

Self-custody (being your own bank) and carrying out peer-to-peer transactions with a modicum of privacy is how crypto was designed.

And while the Financial Action Task Force (FATF) seeks to impose a traditional anti-money laundering (AML) framework onto virtual asset service providers (VASPs), it’s worth restating that crypto was born out of a desire to disintermediate traditional finance, rather than break the law or facilitate money laundering.

Deep in the thick of the standoff between crypto users and regulatory authorities are blockchain analytics firms such as CipherTrace, Chainalysis and Elliptic, which often act as a window into crypto for law enforcement agencies.

CipherTrace said it could could not comment on work with regulatory authorities or law enforcement agencies.

“It’s uncertainty that regulators see as problematic.”

Rightly or wrongly, these sleuthing companies are guided by certain red flags when it comes to tracking funds around the cryptosphere, seeing regulatory risk wherever money moves in and out of self-hosted wallets, privacy coins, peer-to-peer exchanges and bitcoin (BTC, -2.76%) ATMs, for example.

Self-hosted wallets remain outside FATF’s reach for now, but the proportion of funds moved between exchanges and private wallets is a focal point for blockchain sleuths. This is not necessarily to do with criminal activity, said CipherTrace CEO Dave Jevans, but simply because authorities can’t see what’s going on.

“It’s uncertainty that regulators see as problematic,” Jevans said.

In a previous article, CipherTrace provided a snapshot of exchanges domiciled in the Seychelles, giving each a KYC score. Here, the analytics company dives into non-custodial and peer-to-peer exchanges such as ShapeShift, LocalBitcoins and Paxful.


ShapeShift, the non-custodial exchange launched in 2014 by privacy advocate Erik Voorhees, has been an ongoing subject of KYC and fund-flow analysis by CipherTrace. In August 2018, ShapeShift hired former Hogan Lovells partner Veronica McGregor as the exchange’s chief legal officer, and soon after began requiring customers to reveal their identities to the exchange.

ShapeShift had been given a “red,” or weak, KYC score by CipherTrace, which had also highlighted the proportion of funds flowing in and out of private wallets as a likely indicator of illicit activity.

However, this score has since been upgraded to green by CipherTrace, which acknowledges that grading the KYC processes of exchanges is a “dynamic state of affairs.”

“We agree that their KYC processes today are green,” said John Jefferies, chief financial analyst at CipherTrace. “ShapeShift is a very unique company, with an interesting past. This has spurred us to look at this edge case. Before September 2018 they had no KYC, and those hundreds of thousands of transactions are still on the blockchain and some are involved in ongoing investigations.”

Hannah Burke, ShapeShift director of compliance, said the firm’s revamped KYC involves the collection of a full range of personally identifiable information (PII) as well as screening for sanctions and politically exposed persons (PEPs), which the firm has been independently audited on.

As far as funds coming from private wallets is concerned, Burke said ShapeShift is non-custodial by design. “Our users will typically use their wallets rather than transferring between exchanges. So it’s not a shock to me that private wallets make up a pretty good percentage,” she said.

Privacy Coins

ShapeShift stands at the intersection of crypto privacy issues, having recently removed support for privacy coins zcash, monero (XMR, -1.73%) and dash.

“We’ve taken down the privacy coins because of their regulatory concerns,” said chief legal officer McGregor. “At least for the moment, we’re not working with those coins.”

“It just comes down to a fundamental view they have on what crypto should be all about.”

Privacy coins such as zcash and monero, and privacy-enhancing wallets (Wasabi, Samourai and others) have valid uses, but are also clear red flags, said Jefferies of CipherTrace.

“There are ways to be compliant with tech like privacy coins,” Jefferies said. “There are ways to make them safe and establish the source of funds, so they’re not inherently bad, per se. However, they do carry with them additional risk.”


The Electric Coin Company, the creators of zcash, commissioned the RAND Corporation to explore the use of cryptocurrencies for illicit or criminal purposes, focusing on zcash.

Rand’s yearlong study showed the top cryptocurrency being used on dark markets or for money laundering and terrorist financing is far and away bitcoin, said Josh Swihart, vice president of growth at the Electric Coin Company.

“Of course, it’s not the number one currency, because the number one currency used for illicit purposes is the dollar, through regulated banks. But the main cryptocurrency is bitcoin, way ahead of even monero,” Swihart said.

In terms of what’s happening on exchanges with privacy coins, Swihart pointed to the U.S.-based exchange giant Gemini becoming the first regulated exchange to support sending funds to shielded zcash transactions. In support of zcash shielded deposits and withdrawals, Gemini stated that they use enhanced due-diligence and may request users provide information on their source of funds, Swihart said.

The zcash currency “is compliant under U.S. regulation,” said Swihart. “As evidenced by zcash support at Gemini, Coinbase and others, ShapeShift’s delisting of zcash, monero and dash does not mean that zcash isn’t compliant. It’s specific to ShapeShift.”


CipherTrace has some history when it comes to LocalBitcoins: A report from earlier this year found the Finland-based P2P exchange was the go-to place for criminal bitcoin transfers for a third year running.

CipherTrace gives LocalBitcoins a yellow KYC grading and remains categorical about its status, calling it a “high risk” exchange.

“These guys are used extensively in money laundering,” said CipherTrace CEO Dave Jevans.

In response to this, LocalBitcoins says CipherTrace is basing its view on historical data, prior to when the platform began implementing KYC.

“If we didn’t have KYC and other stuff in the past, that might have been the case,” said LocalBitcoins Chief Marketing Officer Jukka Blomberg. “But if you look now, our volumes relating to dark markets are very small. Overall, we are a very trusted and secure platform now.”

CipherTrace says it has identified consistently high levels of funds flowing from dark markets going to LocalBitcoins, with some 78% of one particular dark market going to the platform, according to Jefferies. In addition, much of the money going in and out of LocalBitcoins is from private wallets, Jefferies said.

“On the subject of private wallets, we recommend to our users not to keep funds in their LocalBitcoins wallet more than they are planning to trade with because we don’t want to act as a wallet service,” said Elena Tonoyan, the firm’s chief operating officer. “Generally, it’s not very safe to keep bitcoins on any platform. There are hundreds of reasons why users might have a couple of wallets or just choose to keep their bitcoins in private wallets.”

Tonoyan pointed out that LocalBitcoins’ revamped compliance procedures means KYC is done on all users of the platform, and it’s not the case that older or previously existing accounts are grandfathered into the new regime.

“I would like to point out that we do KYC on all our customers,” said Tonoyan. “Say you had created a LocalBitcoins account back in 2014, to continue using the platform you would have to comply with everything we are asking you to do. We give those users who want to continue with us a deadline of 30 days to comply.”

The LocalBitcoins tiered KYC system, which includes mandatory ID verification and face match when a user transacts over 1,000 euros ($1,190) per annum, kicked in for all users following the arrival of the Europe’s Fifth Anti-Money Laundering Directive (AMLD5).


P2P exchange Paxful has been upgraded to a green KYC score by CipherTrace.

In April of this year, Paxful made identity verification mandatory for U.S. citizens and residents, with European and Canadian users added in August, according to Lana Schwartzman, chief compliance officer at Paxful. Paxful has also teamed up with KYC experts Jumio and uses Chainalysis’ know-your-transaction (KYT) tools.

“We have various proactive controls in place, one of which automatically blocks send-outs to specific categories, clusters or addresses,” Schwartzman said. “For example, when the Twitter hack occurred, within minutes we were able to add the addresses associated with the hack and stop all outgoing send-outs.”

Analysis of Paxful fund flows carried out by CipherTrace shows “a fairly high percentage” coming in from gambling and high-risk exchanges, and going straight out to ATMs, said Jevans. In terms of private wallets, this accounts for some 75%, so the source of those funds is “questionable,” he said.

“So people are cashing out their fiat in a way that’s probably not KYC’d because the ATM vendors are probably some of the last – at least outside of the U.S. – to start to implement KYC and AML,” Jevans said. (Despite a recent drive to clean up its act, the bitcoin ATM industry is likely to remain a clear red flag for a number of reasons.)

Summing up, John Salmon, a London-based partner at law firm Hogan Lovells who specializes in fintech, said the CipherTrace findings show the difficult marriage of regulatory and ideological concerns.

“There are also reasons why people might want to use privacy coins and it doesn’t mean that they are all money launderers or criminals,” said Salmon. “It just comes down to a fundamental view they have on what crypto should be all about.”

Updated: 12-18-2020

It’s Here: Treasury Proposes Rule To Monitor Crypto Going To Self-Hosted Wallets

Many have called the long-rumored rules an existential threat to peer-to-peer transactions.

The Treasury has released its long-awaited proposal to restrict money services businesses, including U.S.-registered crypto exchanges, from dealing with self-hosted wallets.

In a Friday evening announcement, the Treasury’s Financial Crimes Enforcement Network, or FinCEN, announced proposed rules requiring registered crypto exchanges to verify the “identity of their customers, if a counterparty uses an unhosted or otherwise covered wallet and the transaction is greater than $3,000.”

The rule is currently just a proposal. The Treasury has given stakeholders 15 days to respond with comments.

How To Submit Your Comments For The Treasury’s Proposed Rule To Monitor Crypto Going To Self-Hosted Wallets


Written comments on this proposed rule may be submitted on or before January 4, 2021.


Comments May Be Submitted By Any Of The Following Methods:

Federal E-rulemaking Portal:
Follow the instructions for
submitting comments.

Refer to Docket Number FINCEN-2020-0020 and the specific RIN number 1506-AB47 the comment applies to.

This document is scheduled to be published in the Federal Register on 12/23/2020 and available online at:, and


Policy Division, Financial Crimes Enforcement Network, P.O. Box 39, Vienna, VA 22183.

Refer to Docket Number FINCEN-2020-0020 and the specific RIN number.

For Further Information Contact:
The FinCEN Regulatory Support Section at 1-800-767-2825 or electronically at

* Although the formal comment period concludes 15 days after filing at the Federal Register, FinCEN will endeavor to consider any material comments received after the deadline as well.

My Comments For Proposed Rule by the Financial Crimes Enforcement Network

Requirements for Certain Transactions Involving Convertible Virtual Currency or Digital Assets

Considering that Bitcoin (crypto-currencies ) in general are a new an evolving technology with huge implications for both our economic competitiveness but also job and market efficiencies as well.

We must not squander this opportunity. China and other countries are pushing forward with nurturing this nascent industry which could ultimately be used to gain an advantage over what we are currently afraid to even allow to thrive without undue regulation and cumbersome rules.

The best way to drive this technological revolution out of the US is to impose draconian rules that have even failed to address rampant money laundering, spoofing, market-rigging, etc. in the traditional finance sector. (2 trillion dollars at last count):

* Bank Accused of Breaching Money Laundering Laws—23 Million Times

* Global Banks Hit By New 2 Trillion Dollar Corruption Allegations. Why Authorities Are Unlikely To Act This Time

* The files show Deutsche Bank flagged a total of $1.3 trillion, JPMorgan approximately $500 billion and Bank of America another $384 billion. BNY Mellon underlined a total of $64 billion in 325 separate SARs filed with FinCEN, making it the second-most-frequent filer in the leaked documents.

* JPMorgan Nears Deal To Pay About $1 Billion To Settle Spoofing Probes

* UBS To Pay $68 million To Settle State Libor-Manipulation Claims

* US Customs Seized JP Morgan Chase Ship Carrying $1Billion Of Cocaine:

* American Express Gave Small Businesses One Rate, Then Secretly Raised It. For more than a decade, American Express Co.’s foreign-exchange unit recruited business clients with offers of low currency-conversion rates before quietly raising their prices, according to people familiar with the matter.

Obviously your regulations in the traditional finance sector have failed miserably!!!


Comment Tracking Number: kjd-9qor-xyos


Rumors of the proposed rules have been circulating for the past month. With Treasury Secretary Steven Mnuchin on his way out the door as a new administration comes in, they have been viewed as a parting shot at crypto. Of the announcement, he said:

“This rule addresses substantial national security concerns in the CVC market, and aims to close the gaps that malign actors seek to exploit in the recordkeeping and reporting regime.”

A number of leading lawmakers have already come out in opposition to the proposed rule, which many see as an assault on the nature of peer-to-peer transactions. However, in the absence of a formal law, the Treasury has considerable rulemaking power in this area.

That said, the current proposal is not as radical as some feared. It would, rather, apply existing requirements to keep reports on transactions — the $3,000 threshold of the Travel Rule — to registered entities interacting with self-hosted wallets. Among registered entities, that threshold would instead be $10,000.

Analysts Say Mnuchin’s Proposed Self-Custody Rule Won’t Impact Bitcoin Price

Analysts debate whether the U.S. Treasury Secretary’s new rule about self-custodied wallets could place the current bull run in peril.

This week various media reported that U.S. Treasury Secretary Steven Mnuchin was considering whether or not legislation governing self-custodied wallets should be implemented.

This led some analysts and crypto pundits to speculate whether or not this would impact Bitcoin, and the current bullish momentum that has been driving crypto prices higher.

The threat of new crypto sector-focused regulations is a credible event which has negatively impacted crypto prices in the past, but this time around there are a few reasons why the proposed rule probably will not lead to a Bitcoin price crash.

The Possibility Of Regulation Is Priced Into The Crypto Market

Initially, industry executives expressed major concerns when Coinbase CEO Brian Armstrong shared what he had heard about the planned rule.


These worries were amplified when Circle CEO Jeremy Allaire told Ryan Selkis that the possible regulation could be detrimental to the entire cryptocurrency sector. The comments from the two industry heavyweights led the entire industry to become cautious about the planned rule proposal.

However, recent reports suggest that the rule might require multiple transactions that are equivalent to $10,000 a day to be reported by financial institutions. Compared with the initial rumors about the rule, it is arguably less rigorous than it appeared. In fact, some experts say the proposed rule is similar to the existing FATF travel rule.

Considering that the rule could be less restrictive than the initially planned regulation, and the fact that the market has had sufficient time to act on it, it’s possible that the market has priced it in at this point.

What Path Can Mnuchin Take?

There are two main paths Mnuchin could take to introduce the self-custody wallet regulation. First, he could take the conventional route of rulemaking, which requires a hearing and a 30-day period.

If Mnuchin takes the conventional approach, the proposal would have to be released this week before the current Presidential term comes to an end.

Alternatively, Mnuchin could aim for a “good cause” way of passing the regulation. This would allow Mnuchin to speed up the process. Jason Civalleri, an attorney, said:

“Further, there’s an exception for if an agency articulates ‘good cause’ that the notice/public procedure requirements are ‘impracticable, unnecessary, or contrary to the public interest.’ For example, one possible use of this exception is if needed to stop a pandemic. So Treasury would have to articulate why it wants to skip this requirement for ‘good cause.’ For example, maybe it can show an extraordinary amount of criminal activity will be stymied by the new rule’s early implementation. Seems unlikely, but maybe?”

At this point, it is more likely for Mnuchin to take the conventional approach. To take the “good cause” method, he would need to find sufficient evidence to prove that crypto sees significant criminal activity.

Hence, the probability that the proposed rule would be introduced in the upcoming days remains the highest, which would be optimistic for Bitcoin. Matt Odell, a Bitcoin and privacy advocate, said:

“The Block speculating that US gov will simply require exchanges to report bitcoin withdrawals larger than $10k. I already assumed they did this tbh. The concerns Armstrong and Davidson voiced seemed to expect much worse. Maybe the public concern helped. Very bullish if true.”

Under the advanced notice of proposed rulemaking, users who want to send cryptocurrencies from centralized exchanges to a private wallet would need to provide personal information about the owner of that wallet to the exchanges, if the amount sent is greater than $10,000 in one day. The exchanges would also need to submit and store records involving such transactions with a total value over $10,000 in a given reporting period, or just maintain records for transactions over $3,000.

In other words, users of centralized cryptocurrency exchanges who want to move their holdings onto their own private wallet, or to someone else’s, would have to provide detailed personal information for transactions greater than $3,000, and exchanges would be required to report either individual or groups of transactions that add up to more than $10,000 to the Financial Crimes Enforcement Network (FinCEN).

Along with another recent proposal, the move would increase the amount of work individuals and exchanges must put into transferring cryptocurrencies, as well as increase the amount of personal data exchanges must hold onto or report to the Treasury Department.

This would bring crypto closer in line with the traditional banking system, perhaps giving greater comfort to institutional investors who are increasingly considering the asset class, but undermining the technology’s early promise of privacy and self-sovereignty.

At a minimum, privacy would require jumping through more hoops:

In a press release, the Treasury said the rule would close “loopholes” around virtual currency transaction reporting.

The general public will have until Jan. 4, 2021 to provide comments or feedback (although another part of the document says feedback can be submitted within 15 days after the rule is published in the Federal Register, the national logbook, on Dec. 23).

“FinCEN assesses that there are significant national security imperatives that necessitate an efficient process for proposal and implementation of this rule,” the document read, adding:

 “U.S. authorities have found that malign actors are increasingly using CVC to facilitate international terrorist financing, weapons proliferation, sanctions evasion, and transnational money laundering, as well as to buy and sell controlled substances, stolen and fraudulent identification documents and access devices, counterfeit goods, malware and other computer hacking tools, firearms, and toxic chemicals.”

Rumors that this rule was in the works circulated last month when Coinbase CEO Brian Armstrong tweeted that the Trump administration was preparing a rushed rule that would require exchanges to verify know-your-customer information for the recipient of a transfer to a self-hosted wallet.

The move would introduce a large amount of friction for crypto users, Armstrong warned at the time.

The rule would be largely in line with guidance from the Financial Action Task Force (FATF) last year that required its member nations to implement KYC rules for virtual asset service providers (VASPs), a term for crypto exchanges and other startups, as well as the so-called “travel rule.”

At the time, FATF’s guidelines suggested that individual crypto wallets could be designated VASPs, saying:

“In cases where the VASP is a natural person, it should be required to be licensed or registered in the jurisdiction where its place of business is located – the determination of which may include several factors for consideration by countries.”

Public Comment Period

Any time a VASP customer sends $10,000 or more in crypto to a self-hosted wallet in a single day, their VASP would be required to verify their identity, collect the identity of their counterparty, and file a report with FinCEN, under Treasury’s proposed rule.

The rule would force banks and money services businesses (MSBs) to compile and verify the same information for all unhosted wallet transactions over $3,000. They would not need to file a report with FinCEN for these four-figure transfers, however.

As has been rumored for weeks, the rule’s main target appears to be self-hosted wallets (FinCEN calls them unhosted wallets). These are wallets that grant their users access to the private keys, giving them full control over the funds, just like the leather wallet in your pocket or purse.

Treasury also intends to apply the reporting rules to foreign wallets tied to countries on FinCEN’s money laundering watch list. This means Myanmar (which FinCEN calls Burma), Iran and North Korea to start.

FinCEN suggested that a large portion of crypto transaction activity might be suspicious, writing that “despite significant underreporting due to compliance challenges in parts of the CVC [convertible virtual currency] sector, in 2019, FinCEN received approximately $119 billion in suspicious activity reporting.”

“A significant majority” of these transactions might relate to possible legal violations, the document said.

Central Bank Digital Currencies

The document also references “digital assets with legal tender status (LTDA),” a term apparently referencing central bank digital currencies (CBDCs). The term first appeared around the end of October in government documents.

LTDAs have legal tender status, but are not currencies, according to a footnote. They can be treated as being similar to “coins and currency of a foreign country, travelers’ checks, bearer negotiable instruments” or other financial instruments.

Another note says that at present, “only a limited number of transactions occur involving LTDA,” though several countries are developing LTDA systems.

LTDAs are referenced as being distinct from CVCs in the advanced notice.

Widespread Pushback

Marta Belcher, a civil liberties and technology attorney, told CoinDesk that in her view, “one of the most important things about cryptocurrency is that it imports the civil liberties benefits of cash into the digital sphere by allowing for anonymous transactions.”

The ANPR is part of a trend where the U.S. government seeks to implement traditional banking system surveillance tools in the crypto space, said Belcher, who is also special counsel at the Electronic Frontier Foundation.

“There are photos from the Hong Kong protests of long lines at the subway stations as protestors waited to purchase tickets with cash so that their electronic purchases would not place them at the scene of the protest,” she said. “These photos underscore that a cashless society is a surveillance society; that is why the ability to import the anonymity of cash to the digital world is so important for civil liberties.”

The rule received pushback from the crypto community well before details were officially announced. Armstrong criticized the rule, saying he believed there may be unintended consequences.

Part of the concern stems around the rapid pace at which Mnuchin – and agencies that report to Treasury – are implementing new rules. FinCEN, a bureau of the Treasury, moved to lower the threshold for applying the travel rule to international money transfers, including cryptocurrencies. While that rule change proposal did see a public comment period, it was shorter than typical by at least 30 days.

Kristin Smith, executive director of the Blockchain Association, said in a statement, “Undercutting that ability with last-minute rulemaking in the twilight days of an outgoing administration is not the way to make the type of long-lasting, responsive regulations that will support the safe growth of this industry in the U.S.

Whether regulators acknowledge it or not, crypto is here to stay and should be considered a pro-growth part of the national economy, not something to be brushed aside quietly at the midnight hour.”

Peter Van Valkenburgh, research director at Coin Center, likewise called Friday’s proposal “rushed,” saying some of the recordkeeping requirements might be “infeasible in the context of cryptocurrency transactions.”

FinCEN does not appear to be bothered by these fears. In fact, the agency asserts it has no legal requirement to hold a comment period of any length but is giving the public a shot anyhow. Delaying implementation could spur individuals to move their funds fast, FinCEN warned.

The moves increase the amount of work individuals and exchanges must put into transferring cryptocurrencies, as well as increase the amount of personal data exchanges must hold onto or report to the Treasury Department.

Republican lawmakers even decried the move, with a public letter signed by U.S. Representatives Warren Davidson (Ohio), Tom Emmer (Minn.), Ted Budd (N.C.) and Scott Perry (Penn.) asking Mnuchin to discuss the move with elected officials. Earlier on Friday, Senator-elect Cynthia Lummis (R-Wyo.) said she was concerned by the move.

Other industry representatives criticizing the move include Circle CEO Jeremy Allaire, who wrote an open letter to Treasury Department staff saying the proposed rule “would inadequately address the actual risks that are at issue,” and harm the industry overall.

International Restrictions

The U.S. follows a number of other nations in implementing stricter identity verification rules around crypto wallets. France, the Netherlands and Switzerland have all created their own form of stringent wallet rules this year.

De Nederlandsche Bank, the Netherlands’ central bank, apparently began requiring exchanges to ask its customers what they intend to use their cryptocurrencies for as well as verify that they were the owner of the wallets they were trying to transfer funds to.

Similarly, Switzerland has required exchanges to “prove ownership of non-custodial wallets” since the start of the year.

Prior to the U.S., France was the latest country to force such identification requirements on crypto exchanges, barring anonymous accounts and hinting at further digital ID rules.

Unlike the other countries, however, French Finance Minister Bruno Le Maire cited concerns around crypto being a potential source of terrorism funding rather than FATF in the rules’ rollout.

Van Valkenburgh noted that the U.S. proposal differs from the overseas variants, writing, “We are, nonetheless, gratified that the U.S. has not chosen to repeat the mistakes made overseas, and, instead, policymakers have proposed an extension of rules that already apply to traditional financial institutions dealing in cash.”

US Senator-elect Rails Against Potential Crypto Wallet Ruling

Rumored upcoming crypto wallet regulation gains further opposition, this time from Cynthia Lummis, a recently elected Wyoming senator.

As per recent rumors, United States Secretary of the Treasury, Steven Mnuchin, could drop a stringent piece of crypto-related legislation before his expected exit at 2020’s end.

The ruling could potentially severely limit or ban self-custodied digital asset wallets — a key component of the entire industry. Cynthia Lummis, a U.S. Senator-elect hailing from the crypto-friendly state of Wyoming, finds the ruling harmful.

“I spoke with Secretary Mnuchin last week and strongly pressed him for a better path forward,” Lummis said as part of a tweet thread on Friday, adding:

“Congress is best placed to weigh the competing policy issues at stake. A rule adopted now could also potentially extend the BSA to new types of transactions beyond Congress’ intent.”

Lummis is not the only government leader who has expressed concern over the possible legal move. A number of congressional members also recently resisted against the thought of such legislation. Additionally, Coinbase’s CEO Brian Armstrong warned of the consequences stemming from such a regulatory change.

“I am deeply concerned that the Treasury Department is considering a hasty rule governing self-hosted digital asset wallets and the Bank Secrecy Act (BSA),” Lummis said near the beginning of her tweet thread.

“Rather than prematurely adopting a rule on this complex topic, Treasury should immediately begin a transparent process to engage with Congress and industry, building a consensus to drive America forward,” she added.

According to Lummis, restraining the crypto wallet landscape could weigh down the U.S. amid its race against nations such as China. The country has already fallen behind in its global central bank digital currency, or CBDC, pursuits.

“Treasury’s rule would also likely be adopted without public comment under an often-abused portion of the Administrative Procedure Act,” she said. “Transparency makes good policy.”

One of the main selling points of crypto is the freedom it provides. Participants can hold, control and transact their own funds, regardless of the time or day of the week. Crypto and blockchain largely mobilizes money and finance. Stiff regulation could largely exterminate such advantages and innovation.

Lummis Tweeted:

“A rule adopted at this juncture would be a solution in search of a problem. More pressing BSA-related issues exist.”

As a Bitcoiner herself, Lummis knows first-hand the benefits of crypto.

Updated: 12-29-2020

File Your Comments Against New Crypto FinCEN (Unhosted Wallet) Rule, Coin Center Leader Urges

The crypto space needs your help to impact the outcome of the United States’ Treasury’s crypto wallet proposal.

With the two-week commentary period winding down, Jerry Brito, executive director of non-profit crypto policy advocate group Coin Center, says comments could make a difference in the ultimate outcome of the self-custodied wallet ruling recently proposed by the U.S. Treasury.

“Coin Center is working with folks in Congress to get some letters sent to Secretary Mnuchin requesting an extension to the rushed comment period,” Brito said in a Dec. 28 tweet, adding:

“Everyone in the cryptocurrency ecosystem should file a comment with FinCEN explaining how this rule would affect them and pointing out the unintended consequences. Filing a comment really does help.”

With his likely exit from office looming next month, U.S. Treasury Secretary Steven Mnuchin dropped a regulatory proposal on the crypto space on Dec. 18. If passed, the new law would essentially mandate that U.S.-based crypto services must check users’ identities and their respective wallets whenever they withdraw over $3,000 to a self-custodied wallet, or if they move more than $10,000 to another platform.

Rather than the normal 60-day period, the regulatory body only left the crypto industry with a 15-day window for feedback on the proposal. Brito posited feedback from the crypto industry could help the situation by pushing back the deadline.

“Mnuchin wants to get this rule finalized before he leaves office on Jan 20,” Brito tweeted. “But FinCEN is required by law to consider every comment before finalizing the rule,” he added. “If there are a lot of substantive comments filed, they won’t be able to finalize the rule before Jan 20.”

Pushing the proposal’s decision date past Jan. 20 would leave the law undecided until after government leaders change seats. Delaying the proposal through that date would likely lead to a more thought-out legislation, according to Brito.

“Ideally you should write a unique, substantive letter that describes how the rule will affect you or your firm,” he added, pointing toward an example proposed on Twitter by Jake Chervinsky, general counsel for crypto project Compound. Comments need to be in to the Treasury by Jan. 4. Industry folks can also send in shorter remarks via a digital rights entity called Fight for the Future.

U.S. regulatory bodies have ramped up their engagement in the crypto space in 2020, evident in a number of headlines throughout the year.

Updated: 12-22-2020

OKCoin Says Crypto Industry Lacks Means To Comply With New US Treasury Proposal

If passed, the United States’ crypto wallet proposal would create significant hassles for digital asset exchanges.

U.S. Treasury Secretary Steven Mnuchin recently dropped a proposal requiring exchanges and crypto platforms to verify the identity of customers exporting digital assets to self-hosted wallets. Crypto exchange OKCoin noted the proposal would create additional work for exchanges.

“Upon preliminary review of the FinCen [Financial Crimes Enforcement Network] proposal as well as the wallet verification requirements, I think the proposal of extending the CTR requirement to crypto exchanges and having to collect the physical address of the recipient would mean great operational and administrative burden for exchanges,” OKCoin’s chief compliance officer, Megan Monroe-Coleman, told Cointelegraph.

Rumors of potential new crypto wallet laws made the rounds in the crypto space for weeks before Mnuchin finally dropped the bomb on Dec. 18, prior to his expected exit from office. Just a proposal at this stage, the new regulation would require identifying information on parties sending crypto amounts exceeding $3,000 to an independent wallet. If moved between exchanges, the limit rises to $10,000.

After the unveiling on Friday, industry parties have a 15-day window to comment on the proposal. “FinCen has specifically cited ‘national security’ as the reason for the proposal and an extremely short timeline for comments,” Monroe-Coleman said, adding:

“Therefore, OKCoin’s comments which we will submit to them will focus on the challenges that we foresee to our business and the industry as a whole. We would like to request that FinCen issue practical and clear guidelines as well as allowing a generous grace period to increase the likelihood of a successful implementation by the industry, in light of the reality that there is no clear solution or industry wide tools that can help us to comply.”

The proposal, however, did not turn out to be as crippling as initially rumored. Prior to its release, a number of U.S. congressional members spoke out against potential details of the legislation, which included word of a whitelist of permissible addresses that did not end up in the proposal.

Updated: 12-22-2020

Coinbase Seeks Extended Feedback Deadline To FinCEN’s New Crypto Rules

Coinbase says that a 15-day notice-and-comment period for FinCEN’s new crypto rules is not enough.

Coinbase, one of the largest cryptocurrency exchanges in the United States, is advocating extension for the industry’s feedback deadline to newly proposed crypto rules by the Treasury’s Financial Crimes Enforcement Network, or FinCEN.

In a Dec. 21 blog post, Coinbase’s chief legal officer Paul Grewal addressed FinCEN’s newly released rulemaking regarding self-hosted crypto wallets. The blog post represents an open letter to Kenneth Blanco, the director of FinCEN.

In the letter, Grewal considered the new rules by the Treasury’s Financial Crimes Enforcement Network, as an “unfortunate and disappointing departure” from the company’s long-running relationship with the regulator.

Grewal elaborated that the 15-day period granted by FinCEN to the industry to respond to the new rules is not enough, especially given that it is spanning Christmas holidays and comes amid the COVID-19 pandemic:

“FinCEN asked the public to provide comments in just 15 days, spanning Christmas Eve, Christmas Day, New Year’s Eve, and New Year’s Day, in the middle of a global pandemic — leaving just a handful of actual working days for comments.”

As such, Coinbase’s legal executive asked FinCEN to “reconsider its haste” and provide a typical 60-day period notice-and-comment for the proposed rulemaking. Grewal noted that 60-day comment periods to regulations represent an ordinary practice by FinCEN in terms of the traditional financial industry.

“For example, FinCEN’s Customer Due Diligence Requirements for Financial Institutions provided the traditional 60 days for notice and comment,” Grewal noted.

The exec went on to say that an extended notice-and-comment period will provide the industry with a “true opportunity to engage in the review and comment process with respect to the proposed rule as the law requires.” Grewal wrote:

“There is no emergency here […] There is also no justification for treating the cryptocurrency industry so differently from our counterparts in traditional finance. […] The same rationale applies even more so in the midst of a global pandemic.”

Previously, major industry figures like Circle CEO Jeremy Allaire criticized the new rules, appealing for regulators to collaborate with the industry in adopting crypto regulations. Several members of Congress including representatives Warren Davidson and Tom Emmer also opposed the rumored ban on self-hosted crypto wallets on Dec. 9.

Updated: 12-23-2020

Coinbase IPO To Further Legitimize Crypto, But Limitations Remain

“It is a massive event,” and not only in the U.S. but in Europe too, as it will show markets how to value crypto firms.

In some ways, the Coinbase exchange is the poster child for the crypto industry. It has embraced — not fought — regulation, which sets it apart from most cryptocurrency exchanges while the firm’s trading app is praised for its ease of use. When JPMorgan Chase decided to extend traditional banking services to crypto firms in the United States earlier this year — a precedent-setting move — it began with Coinbase and Gemini, another registered U.S. exchange.

Therefore, last week’s report that Coinbase filed a draft registration for an initial public offering with the United States Securities and Exchange Commission wasn’t really a surprise, but it is big news nonetheless — and not just because research firm Messari declared the 35-million-customer company could be valued at $28 billion.

“It is a massive event,” Vladimir Vishnevskiy, director and co-founder of Swiss wealth management firm St. Gotthard Fund Management AG, told Cointelegraph, and not only in the U.S. but in Europe too, because “the IPO will provide a marker in terms of how markets are ready to value such companies.”

Stephen McKeon, a finance professor at the University of Oregon and a partner at Collab+Currency, told Cointelegraph: “Coinbase will represent the first crypto-native corporation to be listed on a major U.S. stock exchange,” and as such, its IPO “will be a significant event for the industry” — assuming, of course, that the offering proceeds as planned.

Meanwhile, Edward Moya, a senior market analyst at forex trading company Oanda, told Cointelegraph: “It looks perfectly timed following the strong breakthroughs with Bitcoin’s mainstream acceptance, high demand for cryptocurrencies and growing institutional interest.”

That said, Coinbase, like other so-called unicorns, will now face “a lot of scrutiny,” added Moya, simply because the IPO market has become so popular recently. Indeed, some are already calling the market “Tech Bubble 2.0” and making comparisons with the frenzied listings of internet firms during the bubble of the late 1990s.

“There is a lot of hot money out in the markets right now,” confirmed Vishnevskiy, and given the strong appetite for IPOs, he expected the offering to be oversubscribed. According to McKeon, “The premiums on the Grayscale and Bitwise funds suggests that there is enormous appetite for exposure to crypto within equity markets, which should foster a warm reception to Coinbase stock.” He added:

“IPO activity is cyclical, it oscillates between hot and cold markets. We are currently in the midst of one of the hottest IPO markets in recent years. Coupled with Bitcoin at all-time highs, makes this a highly opportune time for Coinbase to go public.”

Because of Covid-19-related stimulus efforts, the global economy is awash with liquidity, with not many places to invest. Bond yields are near zero. In this environment, public demand for equity stakes in innovative high-growth tech companies like Coinbase is strong.

Concerns About Service Outages

Is there anything that could derail the process? “If there is some unforeseen circumstance, like widespread media coverage of a new (or mutated) contagion, that could make market observers highly risk-averse, making them less likely to put their money into an IPO,” Charles Bovaird, vice president of content at Quantum Economics, told Cointelegraph.

Moreover, Coinbase has repeatedly gone down during periods of high demand, as Bovaird recalled. Back in 2017, when the SEC rejected the Winklevoss’ Bitcoin (BTC) exchange-traded fund and BTC prices subsequently crashed, many investors, Bovaird included, were unable to trade through Coinbase. That could factor into investors’ assessment during an IPO, since capacity problems were still dogging the exchange in 2020.

Additionally, “Coinbase has a public image problem that they will need to clean up and that might not be easy to do,” added Moya.

The New York Times reported in November that some of Coinbase’s black employees had voiced concerns of discriminatory treatment, and during 2020, the employees were also “discouraged from debating causes or politics internally and from taking up activist causes at work” — all of which could raise some leadership concerns in the minds of potential investors. Moya told Cointelegraph:

“Next year, companies will need to embrace diversity and inclusion and until Coinbase can do that, they may miss out on completely capitalizing on this opportunity.”

Vishnevskiy disagreed that Coinbase had an image problem and said the firm would be viewed as one of the “safer crypto plays” if the IPO goes through. “Interest from Europe is likely to be more muted than in the U.S.,” which is the norm given the more conservative investment tendencies of European investors.

“Nevertheless, I can confirm that I already know of a couple of family offices in Europe interested in getting an allocation,” he told Cointelgraph.

Bovaird added that as an investor, he wouldn’t care about the staffing policies or whether the employees are allowed to have political conversations, adding. “I do care if I can’t use their site to buy (or sell) Bitcoin when I want to.” Still, even if institutional investors actually prefer a “laser-focused” CEO like Coinbase’s Brian Armstrong, retail investors, who have been a major factor in the current IPO “frenzy,” might think differently.

Bringing In New Entrants

Would a publicly held Coinbase drive more users to the cryptoverse? “This could spur crypto adoption,” John Griffin, who holds the James A. Elkins centennial chair in finance at the University of Texas, told Cointelegraph, because companies that survive the IPO process — with its months of scrutiny from regulators, analysts and institutional investors — often emerge battled-tested and a more secure investment, at least in some investors’ minds. By comparison, “Look at WeWork,” Griffin proposed, “it couldn’t survive the scrutiny of a public listing and crumbled.”

Digital assets, as well as IPOs, have been performing at near-record levels in 2020, and “this event could bring a number of new entrants to the space who were focusing just on IPOs previously,” said Vishnevskiy.

According to McKeon, the risk appetite for both areas are very similar, adding: “A Coinbase IPO would further validate the cryptocurrency asset class for the general public, which is likely to lead to further adoption.”

However, One Shouldn’t Expect A Successful Coinbase IPO To Solve All The Industry’s Problems. As Griffin Told Cointelegraph:

“This is definitely a step towards legitimizing crypto and moving into the mainstream. A big issue is that while exchanges like Coinbase are under regulatory scrutiny, [other] exchanges that drive prices may be under little scrutiny. This means the market is still open to manipulation.”

Overall, though, most close observers viewed a Coinbase IPO as a signal achievement for the cryptocurrency and blockchain industry. One recalls the failure of other crypto-native listings such as Bitmain and BitConnect as well as Ripple’s long-anticipated but still unseen IPO.

“Some have failed for disreputable reasons, others because of a difficult U.S. regulatory environment,” said Moya, who then added that anything driving the interest in crypto is a welcome development for the industry.

The IPO is a major event, and according to Griffin, “showing that the path of Coinbase to work within the regulatory process is an economically profitable one.” Meanwhile, John Sedunov, associate professor of finance at Villanova University, told Cointelegraph:

“A Coinbase IPO would be a signal of a further move to the mainstream for cryptocurrency. I don’t think this will push it across the finish line, but it will help continue the process of making cryptocurrency more accessible to investors and potential users.”

Updated: 12-30-2020

Heavy Hitters Of Crypto Call For Users To Comment On Proposed FinCEN Wallet Rule

Coinbase is the latest company to go public with its concerns regarding the U.S. Treasury proposal on crypto wallets.

A number of players are encouraging individuals to speak out against FinCEN’s new crypto rules before comments close next week.

Crypto exchange Coinbase and the foundation behind Monero are the latest firms to join in calling for crypto users to share their thoughts on the U.S. Treasury’s Financial Crimes Enforcement Network’s new rules.

In a blog post today, Coinbase CEO Brian Armstrong said the proposal would represent “too big of an intrusion” on users’ privacy, stating that crypto exchanges would need to collect and share names and addresses for anyone sending or receiving more than $3,000 in crypto in a single transaction. The CEO called on users to submit their thoughts to FinCEN before Jan. 4 when comments would be closed.

Heavy Hitters Of Crypto Call For Users To Comment On Proposed FinCEN Wallet Rule

Coinbase is the latest company to go public with its concerns regarding the U.S. Treasury proposal on crypto wallets.

A number of players are encouraging individuals to speak out against FinCEN’s new crypto rules before comments close next week.

Crypto exchange Coinbase and the foundation behind Monero are the latest firms to join in calling for crypto users to share their thoughts on the U.S. Treasury’s Financial Crimes Enforcement Network’s new rules.

In a blog post today, Coinbase CEO Brian Armstrong said the proposal would represent “too big of an intrusion” on users’ privacy, stating that crypto exchanges would need to collect and share names and addresses for anyone sending or receiving more than $3,000 in crypto in a single transaction. The CEO called on users to submit their thoughts to FinCEN before Jan. 4 when comments would be closed.

Monero Outreach issued a similar plea on Monday with seemingly more assertive language, specially requesting crypto users “voice their opposition” to the “dangerous new rules.” The group claimed that once FinCEN had the necessary customer information, regulators would be able to track all user transactions without a warrant, data that could be potentially compromised.

“This [rule] not been required before, and it will not only threaten the privacy of every cryptocurrency user today, but it will also impede creative future uses of cryptocurrency,” said Monero Outreach. “This is in an area that can easily go very wrong.”

FinCEN proposed the new rule on Dec. 18, giving individuals 15 days to comment with their thoughts. If implemented, the rule would require registered crypto exchanges to verify the identity of their customers under certain conditions, including using “an unhosted or otherwise covered wallet” and if the transaction exceeds $3,000.

Coinbase chief legal officer Paul Grewal later responded that the deadline to provide feedback was inadequate given the holidays and the ongoing pandemic. He requested the regulator provide a 60-day period for comments on the proposed rules. At the time of publication, the Jan. 4 deadline is still firm.

Meanwhile, non-profit crypto advocacy group Coin Center is encouraging “everyone in the cryptocurrency ecosystem” to file a comment on the FinCEN proposal. More than 920 parties have already submitted their thoughts to FinCEN, including CEO Peter Smith and Compound General Counsel Jake Chervinsky. In a Twitter thread, Chervinsky claimed the rule would not “stop the flow of funds to bad actors or help law enforcement do its job.”

Smith, on the other hand, sent his comment directly to Treasury Secretary Steve Mnuchin. In a blog post last week, the CEO said he believes the rule needs additional consultation and review before being considered, given the potential impact:

“Crypto is a nascent and growing industry. We have talented teams and entrepreneurs across the United States who are innovating yet would buckle under the weight of this regulation.”

Monero Outreach issued a similar plea on Monday with seemingly more assertive language, specially requesting crypto users “voice their opposition” to the “dangerous new rules.” The group claimed that once FinCEN had the necessary customer information, regulators would be able to track all user transactions without a warrant, data that could be potentially compromised.

“This [rule] not been required before, and it will not only threaten the privacy of every cryptocurrency user today, but it will also impede creative future uses of cryptocurrency,” said Monero Outreach. “This is in an area that can easily go very wrong.”

FinCEN proposed the new rule on Dec. 18, giving individuals 15 days to comment with their thoughts. If implemented, the rule would require registered crypto exchanges to verify the identity of their customers under certain conditions, including using “an unhosted or otherwise covered wallet” and if the transaction exceeds $3,000.

Coinbase chief legal officer Paul Grewal later responded that the deadline to provide feedback was inadequate given the holidays and the ongoing pandemic. He requested the regulator provide a 60-day period for comments on the proposed rules. At the time of publication, the Jan. 4 deadline is still firm.

Meanwhile, non-profit crypto advocacy group Coin Center is encouraging “everyone in the cryptocurrency ecosystem” to file a comment on the FinCEN proposal. More than 920 parties have already submitted their thoughts to FinCEN, including CEO Peter Smith and Compound General Counsel Jake Chervinsky. In a Twitter thread, Chervinsky claimed the rule would not “stop the flow of funds to bad actors or help law enforcement do its job.”

Smith, on the other hand, sent his comment directly to Treasury Secretary Steve Mnuchin. In a blog post last week, the CEO said he believes the rule needs additional consultation and review before being considered, given the potential impact:

“Crypto is a nascent and growing industry. We have talented teams and entrepreneurs across the United States who are innovating yet would buckle under the weight of this regulation.”

Updated: 1-1-2021

Congresspeople Chastise The Treasury For Rushing New Crypto Monitoring Proposal

As many in the crypto industry have said, 15 days over the holidays is just not enough time to respond.

Nine congresspeople have signed on to a letter to Treasury Secretary Steven Mnuchin, telling him to hold his horses.

The Thursday letter is in response to the Treasury’s recent proposal to make registered crypto businesses hold on to more customer information, especially when transacting with self-hosted wallets.

The proposal has been met with widespread outrage from the crypto community. Among grievances, many cite the fact that Mnuchin is pushing this rule out just weeks before the administration of Joe Biden comes into power, and with it his likely replacement, Janet Yellen.

Accompanying new proposals for rules are invitations for public comment. This remains true in this case, but while the usual comment period is 60 days, the Treasury has here asked for just 15. The comment period expires on Monday, which is the point that the signatories to yesterday’s letter are fighting against:

“The proposal in question was made public just before the Christmas holiday, and it announced that the public would be afforded 15 days to file comments. A comment period consisting of eight business days over two holidays is not appropriate for regulating any industry, and could result in in stakeholders being unable to meaningfully respond.”

The congresspeople who signed the letter include many of the usual suspects in crypto legislation. Blockchain Caucus members Warren Davidson, Tom Emmer, David Schweikert, Darren Soto and Ted Budd all signed, as did AI caucus leader Bill Foster.

However, some figures less involved in the crypto industry have joined, including Tulsi Gabbard, Sen. Tom Cotton and incoming chair of the New Democrat Coalition, Suzan DelBene.

Given that the formal period for open comments closes on Monday and today is, as you may have noticed, New Year’s Day, it’s unlikely that the Treasury is going to back down. There is, however, talk of a lawsuit against the department on the basis of a violation of procedure, should this rule come into effect.

Updated: 1-4-2021

Treasury Logs Almost 6000 Comments On Self-Hosted Crypto Wallet Monitoring Proposal (6hrs Left)

It looks like crypto stakeholders turned out in force, despite the Treasury’s best efforts to evade scrutiny.

Despite many objections to the truncated timeframe, public comments are due tonight in response to the U.S. Treasury’s proposal to require businesses like crypto exchanges to know the identities behind wallets with which they transact.

As of Sunday night, the Treasury’s Financial Crimes Enforcement Network, or FinCEN, had recorded 5,633 responses to its proposed rule. That number is despite the fact that FinCEN gave only 15 days, rather than the usual 60 for responses.

The office dropped its announcement on Dec. 18, a Friday evening a week before Christmas Day in the states. Meanwhile, today, the due date, is the first usual workday after New Year’s Day. Not to mention the fact that the Treasury is only 16 days away from the auspices of a Biden administration.

FinCEN’s timing has been the subject of criticism from a number of lawmakers as well as the crypto community. Adding to the problem, some potential commenters have reported issues on using the U.S. federal government’s main portal. Particularly on Tuesdays and Thursdays, a separate beta site has been damaging links.

Which is not to mention criticism of the rule itself, which would require registered money services businesses, especially crypto exchanges, to both adopt Bank Secrecy Act limits on transactions to and from their platforms and, indeed, go beyond them by requiring they know the beneficial identity of any self-hosted crypto wallet on the other end of a transaction valued at $3,000 or more. Many see this as a bold violation of privacy by a Treasury regime that is not going to have to see the policy through.

Updated: 1-5-2021

Andreessen Horowitz Joins Push Against FinCEN’s 11Th-Hour Crypto Rules

The venture capital firm has taken issue with U.S. regulators latest move against crypto.

Major venture capital firm Andreessen Horowitz, also known as a16z, is the latest crypto-related form to oppose a recently proposed regulation in the United States.

According to a blog post by a16z general partner Kathryn Haun, the Financial Crimes Enforcement Network has issued “a rushed, non-vetted rule under the cloak of the holidays that violates the government’s own established rulemaking procedures.”

FinCEN, which operates under the purview of Steven Mnuchin’s Department of the Treasury, introduced a proposed regulation late last month that would restrict money services business, as well as U.S.-registered cryptocurrency exchanges, from transacting with so-called “self-hosted” wallets.

Effectively, the new regulation would “would require various cryptocurrency entities to collect and report detailed personal identifiable information of their customers’ counterparties.”

Haun noted that this standard is “applied to no other sector of the financial industry today.”

In addition to failing to solve any of the problems it purports to address, Haun says that the rule violates the fourth amendment of the U.S. constitution by expanding the competencies of the Bank Secrecy Act.

Furthermore, in a16z’s official response to FinCEN, the firm’s counsel notes that the regulator has allowed a mere six business days over the holidays for feedback and comment on the proposed law, rather than the customary 60 days.

Some in the crypto community have characterized the move by FinCEN as just another part of President Donald Trump’s lame-duck administration pushing through last minute rules.

Haun said, “FinCEN has proposed at the eleventh hour of an outgoing administration a rule that has all the hallmarks of an arbitrary and capricious agency action.”

Brian Armstrong, the CEO of major U.S. cryptocurrency firm Coinbase, echoed this sentiment on Twitter.

It’s ill advised and didn’t follow proper procedure. FinCEN should revisit in the new administration, engaging with industry, if it still wants to pursue something in this area. It’s not even clear they should btw…

— Brian Armstrong (@brian_armstrong) January 5, 2021

Since FinCEN’s proposed rule was released, crypto industry leaders have been actively pushing back. Armstrong stated that Coinbase would be willing to take regulators to court alongside other major firms, should legal action prove necessary.

Yesterday, Twitter and Square CEO Jack Dorsey wrote a letter to FinCEN, in which he stated that the rule would “not only hamstring law enforcement capabilities, but also limit American innovation by hindering our ability to create a competitive service that allows customers to seamlessly transfer and transact in cryptocurrency the way the technology was designed.”

Jack Dorsey Warns That FinCEN Regulations Will Drive Crypto Users Offshore

Major U.S crypto firms are united in opposition to new AML laws proposed by FinCEN, warning they could drive users away from regulated platforms and stifle innovation.

Major U.S crypto firms are rallying against FinCEN’s proposed regulations that would force businesses operating with crypto to gather information on the identities of non-customer counterparties.

A Jan. 4 letter from Jack Dorsey, CEO of financial services firm Square takes aim at the proposal for seeking to impose reporting obligations that go “far beyond what is required for cash transactions,” and that Sqaure would be expected to collect “unreliable data about people who have not opted into our service or signed up as our customers.”

“Counterparty name and address collection/reporting should not be required for [virtual currency] CTRs or recordkeeping, as it’s not required for cash today.”

Square predicts that if passed, the law would drive cryptocurrency users toward unregulated and non-custodial crypto services based outside of the U.S. — impacting the nation’s global competitiveness and creating further challenges for regulators:

“By adding hurdles that push more transactions away from regulated entities like Square into non-custodial wallets and foreign jurisdictions, FinCEN will actually have less visibility into the universe of cryptocurrency transactions than it has today.”

FinCEN has received widespread criticism for its proposed rule change, with the regulator offering only 15 days rather than the usual 60 days for public comment after publishing the proposal on Dec. 18.

Despite such, nearly 6,000 comments have been submitted to FinCEN on the matter.

Major U.S.-based crypto exchange Kraken was among those criticizing the proposed regulations, slamming FinCEN for failing to provide estimates for the cost of implementing the rule. Like Square it warned that the law will drive users away from regulated platforms.

“It virtually guarantees that the evidence available to law enforcement today will be placed outside their reach tomorrow,” Kraken concluded, adding:

“It is quite clearly a politically-motivated piece of midnight rulemaking, the publication of which diminishes the trust we have placed in FinCEN.”

Coinbase published a submission taking exemption to FinCEN’s proposal, describing the rule as “impermissibly vague,” suggesting that it imposed “expansive privacy invasions on the public,” and adding that it failed to offer a public benefit.

Updated: 1-6-2021

FinCEN’s Wallet Rule Is Open For Another Day Of Comments Because ‘Government Officials Can’t Count To 15’

The website accepting comments on the proposed FinCEN rule shows crypto users have until Jan. 7, not Jan. 4 as the regulator claimed.

The United States Treasury Department may have accidentally widened the window of opportunity for anyone wishing to submit comments regarding the Financial Crimes Enforcement Network’s new crypto rules.

Last month, the Financial Crimes Enforcement Network, or FinCEN, proposed rules that would require registered crypto exchanges to verify the identity of people using “an unhosted or otherwise covered wallet” for a transaction of more than $3,000. At the time, the regulator stated that stakeholders would have 15 days to respond with comments, later clarifying that the submission period would end on Jan. 4.

However, according to — the website responsible for accepting comments on the proposed FinCEN rule — crypto users have until tomorrow, Jan. 7 at 11:59 pm ET to respond. This effectively means FinCEN may have submitted their proposal on Dec. 23 and not Dec. 20 as previously reported.

“This is a s— show,” said Dayton Young, product director at Fight for the Future, a digital rights group based in Massachusetts. “FinCEN has pushed back the comment deadline for its latest cryptocurrency surveillance proposal […] because government officials can’t count to 15.”

The group has encouraged people to speak out against the proposed rule, claiming FinCEN attempted to “ram through this dangerous new surveillance authority.”

When FinCEN announced the new rule, many argued that the period of time for submitting comments was insufficient. Young suggested that the regulator extend the time for comments to 60 days. Coinbase’s chief legal officer, Paul Grewal, has also argued in favor of a 60-day comment period given the holidays and the ongoing pandemic.

At the time of publication, is still accepting comments beyond the Monday deadline, but it is unclear whether any received between Jan. 5 and 7 will be considered valid. Cointelegraph reached out to FinCEN, but did not receive a response at the time of publication.

Updated: 1-6-2021

‘Two Cops On The Beat’: Regulator Wants Sole Authority To Charter Fintech Firms

The OCC’s acting head is pushing against the Consumer Financial Protection Bureau’s intention to charter non-depository fintech firms.

Brian Brooks, the acting head of the U.S. Office of the Comptroller of the Currency and former chief legal officer to Coinbase, has warned against the Consumer Financial Protection Bureau receiving the right to grant “Fintech Charters.”

Earlier this week, the CFPB’s Taskforce on Consumer Financial Law published a report featuring 102 policy recommendations intended to “improve and strengthen” financial regulations, including proposing that Congress empower the CFPB to federally charter nondepository institutions — financial firms that do not take customer deposits and collect fees for other financial services.

Under Brian Brooks’ leadership, the OCC created the Special Purpose Payments Charter for FinTech in 2020, paving the way for certain crypto firms to apply for recognition as a national bank. Paxos and BitPay sought approval for chartering under the new regime in December.

Should the CFPB be extended the right to charter fintechs, it could reduce regulatory clarity as to which agencies non-depository crypto firms should apply to, and create overlaps between the mandates of the two agencies.

In a Jan. 6 statement, the acting OCC head pushed back against the CFPB’s request for the right to charter fintechs, warning the move would undermine legislation intended to separate the regulatory responsibilities of the two agencies after the 2008 financial crisis:

“In its wisdom, Congress in the Dodd-Frank Act separated chartering and prudential supervision from consumer protection enforcement, assigning chartering authority to the OCC and specific consumer protection enforcement authority to the CFPB.”

Brooks argued the existing dynamic “should be preserved” to ensure that neither regulators responsibilities overlap, noting “the additional protections implemented following the last financial crisis […] separated those responsibilities so neither would be compromised in service to the other.”

“That dynamic should be preserved so that the CFPB continues to enforce compliance with enumerated financial consumer protection laws for the financial companies designated by the Dodd-Frank Act, while at the same time avoiding the creation of a prudential supervision gap that could lead to serious safety and soundness risks.”

On Jan 4, the OCC published guidance informing national banks they can use public blockchains and dollar stablecoins for settlement, run nodes and act as validators for blockchain networks.

Updated: 1-7-2021

65K Comments And Counting: Crypto Industry Fights ‘Arbitrary’ Treasury Unhosted Rule

The Financial Crime Enforcement Network (FinCEN), a unit of the U.S. Treasury Department wants crypto exchanges to collect a lot more data about individuals transferring more than $3,000 in cryptocurrencies into private wallets. The crypto industry isn’t having it.

As the public comment period for the controversial rule comes to a close, industry heavyweights are logging their opposition in a coordinated effort. They are trying to delay the rule’s implementation until after a new presidential administration takes over, as well as raise procedural and substantive concerns.

The proposed rule, industry participants contend, could drive crypto innovation outside the U.S. and threaten the digital privacy rights of individuals and entities transacting with cryptocurrencies.

As of press time, well over 65,000 comments had been submitted (though less than 4,000 were available to read), with major fintech firms such as Square, traditional business groups including the U.S. Chamber of Commerce and crypto exchanges like Coinbase filing comments pushing back against the proposed rule.

U.S. lawmakers have also weighed in, asking the Treasury Department to at least slow down and engage with the industry before implementing any strict Know-Your-Customer (KYC) rules on counterparties.

Under the proposed FinCEN rule, unveiled late last month, exchanges would have to collect names and home addresses for the owners of private crypto wallets (also referred to as self-hosted wallets, unhosted wallets or sometimes just “wallets”) receiving more than $3,000 in cryptocurrencies in aggregate in a day.

If a wallet receives more than $10,000, the exchange would be required to file a Currency Transaction Report (CTR) to FinCEN.

U.S. Treasury Secretary Steven Mnuchin first hinted that these rules might be coming in February 2020, 10 months before they were unveiled. However, the rollout seems timed to ensure implementation before President-elect Joe Biden takes office on Jan. 20.

FinCEN hasn’t explained why such a rule that specifically includes counterparty information for convertible virtual currency (CVC) transactions is necessary, said a16z Partners Katie Haun and Anthony Albanese in their comment letter opposing the rule’s implementation.

CVCs are a Treasury Department term for virtual currencies that can be substituted for fiat currencies.

Twitter and Square CEO Jack Dorsey also weighed in, publishing a comment letter Monday.

“The incongruity between the treatment of cash and cryptocurrency under FinCEN’s proposal will inhibit adoption of cryptocurrency and invade the privacy of individuals. Yet, the rule fails to explain the difference in risk. As such, this low threshold and its extension of KYC obligations beyond customer relationships is arbitrary and unjustified,” Dorsey’s response said.

Rushed Rulemaking

On a procedural level, much of the crypto industry has taken issue with the rushed rollout for the proposal. Coinbase CEO Brian Armstrong first said the Treasury Department was considering a rule in late November 2020, but the notice of proposed rulemaking wasn’t actually published until Dec. 18, with a 15-day public comment period that many in the industry say is too short. Typically, these comment periods range from 30 to 90 days.

Indeed, the shortened time period might actually violate the law, said Coinbase General Counsel Paul Grewal. The Administrative Procedure Act requires at least 30 days for public comment periods. Grewal contends that the Treasury Department does not justify a shorter period “on national security or foreign-policy grounds.”

Because the two weeks took place over two weekends and federal holidays (Christmas and New Year’s), this effectively left only half a dozen business days for comments to be submitted, a16z said.

Furthermore, the stated deadline of Jan. 4 wasn’t the actual deadline; As CoinDesk reported last month, the proposed rule was published in the Federal Register on Dec. 23 and given a 15-day comment period, which would end on Jan. 7. FinCEN quietly updated the posted due date on its website on Tuesday.

“A comment period doesn’t really begin until the notice is published in the Federal Register and people cannot file comments until it’s published in the Federal Register,” said Jerry Brito, executive director of industry group Coin Center.

If the rule is finalized, it will likely be challenged in court and the shortened time period will be used as one argument, he said.

“FinCEN can say, ‘well we cured that,’ but effectively people relied on the initial notice. There was no announcement that there was a mistake, so people relied on that and they effectively got only 12 days,” he said.

It’s also possible the Treasury Department doesn’t actually have the legal authority to implement this rule, a Coin Center comment filed on Jan. 7 claims.

The Treasury Department’s use of two different websites – and – to accept public comments is another issue preventing industry participants from easily submitting their thoughts.

Dayton Young, product director at Fight for the Future said in an email that using the two different versions left “some users confused and unable to submit comments.”

Calling the move a “last-ditch effort to expand financial surveillance before the new presidential administration takes over,” Young said his organization had facilitated the submission of over 2,000 comments to the FinCEN website.

“All of this has been done as a deliberate attempt to silence criticism about [its] invasive new rule … [W]e demand FinCEN reinstate the full 60-day comment period so that everyone’s voice can be heard,” he said.

Technological Difficulties

Implementing this rule would also be difficult for exchanges to achieve on a technical level. Matt Corallo, a Bitcoin developer, noted that cryptocurrencies typically do not include built-in mechanisms for banks or other forms of money services businesses to easily retrieve information like names and physical addresses.

“The only practical way in which a regulated entity could retrieve the counterparty information they would be required to hold is to force users to input that information directly when making a transaction,” he wrote.

Wallets also cannot prevent other addresses from sending them funds, which might impact entities such as charities accepting cryptocurrencies – a charity might not be able to accept donations from an entity if it cannot easily collect that counterparty data, Corallo wrote.

In other instances, a trading platform might not be able to prevent an incoming transaction from a customer who refuses to share the appropriate counterparty information, wrote CrossTower President and co-founder Kristin Boggiano.

The rule might end up favoring major players in the industry, wrote Neha Narula and Patrick Murck, from MIT’s Digital Currency Initiative. Smaller or newer exchanges might not be able to quickly build the compliance infrastructure that existing platforms already have.

The proposed rule goes beyond Bank Secrecy Act requirements, a16z claimed. Haun and Albanese’s letter said correspondent banking most closely resembles the FinCEN rule’s KYC obligation, but goes far beyond what correspondent banks must comply with.

“There, the BSA requires banks broadly to understand the correspondent banking customer’s customer base, but only seldom might a financial institution subject to the BSA know and collect information about the identities of specific customers of its respondents.

Here, the proposed rule requires that Covered Entities collect information on their customers’ counterparties, and potentially take steps to verify such information, in all cases,” the letter said.

A traditional financial institution wouldn’t be able to comply with the proposed rule for a similar transaction that doesn’t touch cryptocurrencies, Coin Center’s Brito and Director of Research Peter Van Valkenburgh wrote.

A number of respondents questioned whether sending name and address information to FinCEN would be safe for users.

Fight for the Future’s Young noted that over the past few months, the FinCEN Files were leaked and the Treasury Department’s systems were breached as part of a broader intrusion into U.S. government agencies through the use of a software vendor, SolarWinds.

“If anything, the Treasury’s awful infosec proves just how essential our financial privacy is. We’re safer when we use personal wallets, privacy coins and other financial tools free from government surveillance and interference,” he said.

This concern might prevent new customers from using U.S.-based platforms.

“A number of preliminary discussions with potential and actual customers indicate that they are seriously concerned about providing detailed information to FinCEN, citing recent security breaches at FinCEN as risks,” Boggiano wrote, referencing the FinCEN Files.

Grewal also highlighted the SolarWinds hack, which the FBI, Cybersecurity and Infrastructure Security Agency, Office of the Director of National Security and National Security Agency said Tuesday was part of “ongoing cyber compromises of both government and non-governmental networks.”

The attack, which the U.S. agencies described as “Russian in origin,” compromised over 18,000 entities and individuals.

Similar hacks could put individuals’ personal safety at risk, others wrote. Kristin Smith, executive director of the Blockchain Association, wrote that malicious actors could surveil U.S. citizens or others by associating public addresses with their names if either the federal government or crypto exchanges that store this data were hacked.

“FinCEN itself has acknowledged that the unauthorized disclosure of private financial information ‘can impact the national security of the United States, compromise law enforcement investigations, and threaten the safety and security of the institutions and individuals who file such reports,’” she wrote.

Requiring this type of data collection opens this attack vector, wrote Chamber of Digital Commerce Chief Policy Officer Amy Davine Kim.

“It will similarly increase physical security concerns for CVC holders who may be subject to physical harm or threats from bad actors should their identity become known, particularly those storing CVC in self-hosted wallets,” she said.

Legal Challenges?

Marta Belcher, special counsel to the Electronic Frontier Foundation and an attorney with Ropes and Gray, told CoinDesk she believes the proposed regulation might violate the Fourth Amendment of the U.S. Constitution, which protects against “unreasonable searches and seizures” and requires probable cause for warrants to be issued.

While she believes warrantless surveillance of the financial system at large is similarly unconstitutional, she noted the U.S. Supreme Court had previously ruled in U.S. v. Miller that the Bank Secrecy Act was constitutional as there isn’t a reasonable expectation of privacy when data is shared with a third party, such as banks.

However, “the Supreme Court has been chipping away at the third-party doctrine in cases like Jones, Riley and Carpenter,” she said, due to the amount of data that is now available online.

“In addition, the government has greatly expanded the Bank Secrecy Act’s reach since Miller,” she said. “I think that if Miller was revisited today, it might have a very different outcome – that is, the court would hold that the warrantless mass surveillance of financial records is a Fourth Amendment violation.”

Implementing the rule would effectively ensure that the government would have all transaction information tied to a given address, regardless of how much is transacted due to the nature of a public blockchain, she added.

Grewal and Kim agreed in their respective notes, noting that this would be true for individuals who never signed up to become an exchange customer and therefore might not know that their data is being stored.

Grewal said that FinCEN and the Internal Revenue Service do not currently use all of the data it collects from the traditional financial system. What’s more, implementing the proposed rule could add a huge amount of new data to these databases. He projected that Coinbase alone could file up to 7,000 reports per day.

Updated: 1-14-2021

Treasury Backs Down: Crypto Monitoring Rule Will Wait Until New Administration

This is a big win for the crypto industry today, which was unanimous in opposition to a new anti-money laundering rule that many saw as rushed and draconian.

In response to a deluge of comments, the United States Treasury Department’s Anti-Money Laundering office is slowing its roll on a rushed proposal to monitor a whole new range of cryptocurrency transactions.

On Thursday, the Treasury’s Financial Crimes Enforcement Network, or FinCEN, announced that it was extending the window on comments in response to a rule originally announced two days before Christmas and less than a month before a new administration takes over.

The rule as originally proposed sought to add new thresholds for registered money services business — i.e., crypto exchanges — transacting with self-hosted wallets, which are only identifiable by their keys. The proposal provoked an uproar from the cryptocurrency community, which saw it as a violation of the tenets of peer-to-peer transactions as well as the procedural rules that govern U.S. regulators.

The original comment period extended for only 15 days, many of which were holidays. Today’s extension represents a huge victory for the crypto industry. By the office’s account: “FinCEN appreciates the robust responses already provided by commenters and has reviewed more than 7,500 comments submitted during the NPRM’s original comment period.”

With the inauguration of Joe Biden just six days away, the Treasury’s leadership is likely to see a major changing of the guard. Few predict Janet Yellen, Biden’s nominee to replace current Treasury Secretary Steven Mnuchin, to be as hawkish about such transactions.

FinCEN seems to have given special credence to arguments that there are different thresholds at play between applying bank-style provisions on cash transactions as opposed to foreign transaction-level thresholds to crypto wallet exchanges.

Currently, a bank has a duty to report any withdrawal or deposit of more than $10,000 in cash. Meanwhile, the infamous Travel Rule dictates that any transaction of more than $3,000 coming into or leaving the United States needs to pass along identifying information about the transactors.

Consequently, FinCEN is giving an 15 days to respond to the $10,000 threshold and an extra 45 to respond to the $3,000:

“FinCEN is providing an additional 15 days for comments on the proposed reporting requirements regarding information on CVC or LTDA transactions greater than $10,000, or aggregating to greater than $10,000, that involve unhosted wallets or wallets hosted in jurisdictions identified by FinCEN.

FinCEN is providing an additional 45 days for comments on the proposed requirements that banks and MSBs report certain information regarding counterparties to transactions by their hosted wallet customers, and on the proposed recordkeeping requirements.”

FinCEN had not responded to Cointelegraph’s request for comment as of publication time.

Joining the proposed crypto monitoring thresholds was another new proposal from FinCEN that would require disclosure of offshore crypto accounts holding more than $10,000.

Updated: 1-14-2021

FinCEN Extends Comment Period For Controversial Crypto Wallet Rule

Critics of the rule said it would be technically impossible for some projects to comply because smart contracts and author-decentralized tools do not have name or address information to provide.

The Financial Crimes Enforcement Network (FinCEN) said Thursday it would reopen its proposed rulemaking period for an additional 15 days for its reporting requirements, and another 45 days for a requirement on recordkeeping and counterparty reporting requirements.

First submitted Dec. 18, the proposals would require exchanges to store name and address information for customers transferring over $3,000 in crypto per day to private crypto wallets, and file currency transaction reports (CTRs) for customers transacting in over $10,000 per day.

Critics of the rule said it would be technically impossible for some projects to comply because smart contracts and author-decentralized tools do not have name or address information to provide.

Perhaps most important, the extension means Treasury Secretary Steven Mnuchin, who is said to be spearheading this effort, will be out of office by the time the comments period closes, perhaps allowing for FinCEN to better incorporate industry feedback.

In its public notice, FinCEN wrote that the proposed CTR requirements “are essentially equivalent to the existing CTR reporting requirements that apply to transactions in currency,” and called the proposal “vital” to closing loopholes that terrorists or other malicious actors might use. This is the part that will see a 15-day extension for comments.

FinCEN was less effusive about the recordkeeping and counterparty details, only writing, “FinCEN is providing a longer period in light of the somewhat greater complexity of those aspects of the proposed rule and various issues identified in comments received during the original comment period.”

This was the part that raised the most controversy from the industry, receiving over 7,000 comments, with the majority of responders criticizing the rule or the speed by which it was being pushed through.

In a statement, the Chamber of Digital Commerce said if the proposed rule was implemented as-is, “a series of unintended consequences that raise serious privacy concerns would have resulted from this rushed rulemaking process.”

The extension doesn’t mean the rule will not be implemented; it’s still entirely possible that FinCEN will choose to run with the rule after the final version is published.

The clock restarts when the document is published in the Federal Register, the nation’s logbook. According to public documents, this will be Jan. 15.

Dayton Young, product director at Fight for the Future, welcomed the extension in a statement, saying, “we’re calling on the Biden-Harris Administration to listen to the public and reject the previous administration’s assault on our privacy rights. We need more than just a change in leadership at the Treasury; we need a change in values and ideology if we hope to stop financial surveillance.”

Updated: 1-20-2021

President Biden Freezes FinCEN’s Proposed Crypto Wallet Regulations

President Joe Biden has frozen all regulatory processes including proposed FinCEN rules detrimental to the crypto industry.

One of the first actions President Joe Biden has taken on his first day in office is to freeze Federal regulatory process, including the controversial self-hosted crypto wallet regulations proposed by former Treasury Secretary Steven Mnuchin.

The announcement came in a White House memorandum for the heads of various federal agencies, the Financial Crimes Enforcement Network (FinCEN) included. The edict doesn’t specify the crypto wallet proposal, but places a general freeze on all agency rulemaking pending review, effective for 60 days from the date of the memorandum.

Crypto industry insiders have lauded the move with Compound Finance General Council Jake Chervinsky stating;

“We fought hard & earned the right to take a breath & reset. Janet Yellen isn’t Steve Mnuchin. I’m optimistic.”

The self-hosted wallet proposal was made by FinCEN on December 18 under former US Treasury Secretary Mnuchin. If passed it would require that banks and money service businesses submit reports, keep records, and verify the identity of customers who make transactions to and from private cryptocurrency wallets.

The proposal has been widely criticized by industry leaders including CEO of financial services firm Square, Jack Dorsey, who said that counterparty name and address collection should not be required for cryptocurrency just as it’s not required for cash today.

Critics also stated that it would be technically impossible for many projects to comply because smart contracts do not contain name or address information.

Biden has appointed Janet Yellen to take over as Treasury Secretary, but she has already put a dampener on the crypto scene with critical comments this week that cryptocurrencies are used “mainly for illicit financing.” But Chervinsky commented that she may not be all that bad:

“First, anyone is better than Secretary Mnuchin, who decided long ago that he hated everything about crypto. Second, although Dr. Yellen may not be a fan now, I expect she’ll be open to learning & listening, & will follow regular order in deciding on new regulations. That’s good.”

Biden has also picked Gary Gensler to head the Securities and Exchange Commission who appears to be more sympathetic to the mission of decentralization than his predecessor.

Updated: 1-27-2021

With Yellen Confirmed, Treasury Moves Forward With Stalled Crypto Monitoring Rule

The Treasury has opened up the comment period for its self-hosted wallet requirements for another 60 days.

The United States Treasury Department’s now-infamous proposal to require information on crypto transfers from exchanges to self-hosted wallets is back in motion.

Per a Tuesday announcement from the Financial Crimes Enforcement Network, or FinCEN, stakeholders will have another 60 days to respond to the proposal. While a marked improvement from the 15-day comment period of the original proposal, unfortunately for the crypto industry, it doesn’t look like the actual terms of the proposal have changed along with the administration.

The news follows Janet Yellen’s confirmation as secretary of the Treasury last night. Shortly after his inauguration, President Joe Biden ordered a freeze on all midnight rulemaking from agencies run by appointees — the Treasury included.

FinCEN had originally announced the proposal right before Christmas with a wildly truncated comment period so that the final rule could come out before Donald Trump left office. It was rumored to be an initiative directly from Trump’s treasury secretary, Steven Mnuchin, himself.

The crypto community reacted with outrage, submitting enough commentary and leveraging enough political pressure to get Mnuchin’s Treasury to extend the comment period, effectively passing the proposal off to his successor. Some hoped that Yellen, who Biden named as his treasury secretary nominee back in November 2020, would be less antagonistic toward crypto.

It remains to be seen what happens after the Treasury gets another round of comments, but the return to this rule on Yellen’s first formal day at work is not cause for optimism. Interested parties can send comments to FinCEN here.

Updated: 1-28-2021

Biden Regulatory Freeze Affects Proposed FinCEN Hosted Wallet Anti-Money-Laundering Rules

FinCEN in December proposed rule that would require banks and cryptocurrency trading platforms to keep records of a customer’s cryptocurrency transactions and counterparties, including verification of their identities, for any transactions exceeding $3,000.

The proposal also said that banks and trading platforms would have to report to FinCEN within 15 days any cryptocurrency transactions that involve unhosted wallets and exceed $10,000. Unhosted wallets allow the owner of a unique digital key to store cryptocurrencies and transact with others directly without going through a financial institution.

The freeze could give companies and industry groups more time to study the proposals, observers said.

A regulatory freeze imposed by the Biden administration could affect regulations proposed by the U.S. Treasury Department unit focused on combating money laundering and terrorist financing.

The White House issued a memorandum last week ordering federal departments and agencies to halt new or pending rules and regulations advanced by the former Trump administration until a Biden appointee reviews the rules. Such reviews are commonly imposed by incoming administrations.

President Biden’s freeze would also apply to proposed rules and regulations that have yet to take effect, with an exception for rules relating to urgent situations, including national security. Rules that aren’t finalized will be withdrawn, while others will be postponed for 60 days with a possible 30-day comment period while the administration decides how to proceed, according to the memo.

The move pauses controversial amendments to anti-money-laundering rules proposed by the Treasury’s Financial Crimes Enforcement Network, or FinCEN, and the Federal Reserve Board.

That would give financial institutions and industry groups more time to study the proposals and submit feedback, said Daniel Stipano, a partner at law firm Davis Polk & Wardwell LLP. “Companies would like to see some of these rules slow down…and industry groups feel like they need to study these proposals and figure out how they are going to respond,” he said.

FinCEN and the Fed in October proposed rules requiring financial institutions to collect and pass along sender and receiver details on a broader scope of transactions. The agencies proposed an amendment to anti-money-laundering rules that would require financial institutions to collect, retain and transmit to other institutions certain information related to international transfers and transmittals of funds above $250, down from $3,000. The agency said the so-called travel rule would preserve an information trail that would later help law enforcement and regulators investigate and prosecute illicit activities.

Some financial institutions have raised concerns that the amendment could add more of a compliance burden on banks that process such payments, but others are supportive of the effort. The proposal received more than 2,800 comments by the end of the comment period of Nov. 27, but it remains in proposal status.

The proposal, which originally gave a 15-day comment period—shorter than usual—received more than 7,500 comments and has drawn criticism from the crypto industry. FinCEN on Tuesday announced another 60-day comment period regarding the crypto rules.

“FinCEN is working closely with Treasury’s new leadership regarding the Federal regulatory process as we execute our critical mission of promoting national security and safeguarding the financial system,” a spokeswoman for FinCEN said in an email.

Dayton Young, product director at digital-rights advocacy group Fight for the Future, said the proposed rule would threaten the data privacy of cryptocurrency users. Others have said the rule would impede the U.S.’s leadership in digital assets.

Janet Yellen, who was sworn in as the Treasury secretary on Tuesday, would ultimately be responsible for the review of the agency’s rule-making. She might also delegate the power to another person, according to the memo.

Ms. Yellen, in a written response last week to questions from the Senate Finance Committee as part of her confirmation hearing, said she would “ensure a full and substantive review of the proposals, which will include an assessment of how to ensure proper input from stakeholders.”

Updated: 3-5-2021

Bitcoin Storm Brewing Over Trump’s Anti-Money Laundering Push

The Biden administration will soon have to settle a Bitcoin fight it didn’t even start, and its decision could have far-reaching implications for the virtual currency industry.

The battle concerns last-minute rules proposed by the outgoing Trump administration that would create new requirements for financial services firms to record the identities of cryptocurrency holders. The measures are meant to smother attempts to use Bitcoin and other cryptocurrencies for money laundering or to finance illegal activities. If adopted, they could cause cryptocurrency prices to plummet, according to some analysts.

Heavyweights from both K Street and Wall Street have mobilized against the rule, including the U.S. Chamber of Commerce, mutual fund giant Fidelity Investments and venture-capital firm Union Square Ventures. Cryptocurrency players like the Winklevoss twins, the Blockchain Association and Coinbase Inc. are also fighting the measures.

After President Donald Trump lost the election, the Treasury Department raced to issue the rules, which fell under its Financial Crimes Enforcement Network or FinCEN.

The move generated thousands of negative comments and drew the threat of a lawsuit by a crypto trade group — prompting a last-minute reprieve that pushed the final decision to the Biden administration and Treasury Secretary Janet Yellen. There’s no timetable for when a decision will be made.

The proposal threatens what some view as Bitcoin’s strongest feature: the ability to send money without the government watching. Users whose wallets now are only identified with codes would have their true identities recorded with the financial institutions they zealously avoided.

If Yellen moves forward with the rules, crypto proponents say some virtual-currency services will become more costly and some uses of such currencies could disappear completely. If she doesn’t, some fear criminals will be free to circumvent U.S. surveillance to hide money or finance terrorism.

If adopted, the regulations could cause a sharp fall in the prices of virtual currencies like Bitcoin, said Matthew Maley, chief market strategist for Miller Tabak & Co., adding that he thinks Bitcoin’s price will continue to rise in the long term. On Thursday at 5 p.m. in New York, one Bitcoin cost $47,919, up 5.7% from the end of February, but still nearly 18% below its peak on Feb. 21.

“Bitcoin is very risky and very volatile and it’s going to continue to be that way. If you add something like a new regulation, it’s going to be very vulnerable to a correction,” Maley said.

At issue is a FinCEN proposal meant to make it harder for Bitcoin users to hide their identities. One part of the rule would require banks and money services businesses, like cryptocurrency exchanges, to file a report to the Treasury when a customer moves at least $10,000-worth of virtual currency into a wallet not hosted at an exchange.

Those so-called unhosted wallets can be kept offline and are hard to track. Banks send such reports under anti-money laundering rules when customers withdraw $10,000 in cash.

The second part of the regulation would require banks and exchanges to keep a record whenever their customers send $3,000-worth of virtual currencies to someone else’s unhosted wallet. The record would have to include the identity of the counterparty, something that Bitcoin advocates said would be expensive and sometimes impossible to verify.

Normally, such rules undergo a lengthy public process that involves months of feedback and revisions. But when FinCEN published the rule on Dec. 18, it said it wanted to move swiftly and allowed only 15 days for comments — during a time period that included both Christmas and New Year’s Eve. As a rationale, FinCEN officials said the lack of oversight on some transactions was a national security threat.

The truncated comment period took Bitcoin advocates by surprise, said Kristin Smith, who leads the Blockchain Association, a cryptocurrency trade group. Smith said she had expected the Treasury to take several months, but it suddenly became an “all-hands-on-deck situation.” The organization in December threatened to sue Treasury for rushing the process.

Crypto advocates flooded FinCEN with comments, arguing that the process was rushed and the rules were unworkable. FinCEN to date has received about 7,600 public comments.

The U.S. Chamber of Commerce wrote that the rule would have “unintended long-term consequences” on the virtual currency industry. Hedge-fund manager Mike Novogratz’s Galaxy Digital Holdings LP also submitted comments excoriating the proposal.

Gemini, a crypto exchange founded by Cameron and Tyler Winklevoss — the twins who settled a long-running dispute with Facebook Inc. founder Mark Zuckerberg over who had the idea for the social media network — wrote that FinCEN’s proposal could actually increase money laundering by encouraging criminals to move all of their crypto activities to unregulated markets outside the U.S.

Republican lawmakers, including former Representative Cynthia Lummis, who is now a Wyoming senator; Arkansas Senator Tom Cotton and Democratic Representative Tulsi Gabbard of Hawaii, also reached out to Mnuchin in letters and phone calls to criticize the rule and short comment period.

Fight for the Future, a digital rights advocacy group, set up a website, called “Stop Financial Surveillance,” that said FinCEN’s proposal would “facilitate extremely intense financial surveillance on an unprecedented scale.” The site included a web form for users to easily send a comment to the Treasury, which product director Dayton Young said has been used more than 3,000 times.

Some individual virtual currency owners who didn’t give their names told FinCEN the rule would unfairly expand surveillance of American citizens.

The Treasury Department in January yielded to the pressure and ultimately extended the comment period to the end of March, leaving the matter to the Biden administration, which could make a decision later this year.

That for us was our moment of victory,” said Smith. “Crypto won.”

Updated: 4-1-2021

Japan’s FSA Asks Cryptocurrency Industry Group To Introduce FATF Travel Rule

Japan has been a member of the FATF since 1990.

Japan has made another step toward adopting cryptocurrency Anti-Money Laundering regulations developed by the Financial Action Task Force, Cointelegraph Japan reports.

The Japanese Financial Services Agency announced Wednesday that it will adopt the FATF’s travel rule — a set of regulations requiring virtual asset service providers to share transaction data for senders and recipients — by April 2022. “It is required to introduce and implement the travel rule regulations in each country,” the FSA noted.

The FSA requested the Japanese Virtual Currency Exchange Association, a local self-regulatory crypto organization, to prepare for the implementation of the travel rule:

“From the perspective of ensuring the proper and reliable execution of the crypto asset exchange business, we will examine the accurate implementation of the travel rule in terms of technology and operation. We would like the JVCEA to establish a necessary system, so please inform the members of the association.”

As previously reported by Cointelegraph, the FATF introduced the travel rule in 2019, which provides a number of measures to prevent cryptocurrencies from being used for money laundering and terrorist financing.

A member of the FATF since 1990, Japan was among the most receptive jurisdictions to the travel rule directive alongside other Asian countries like South Korea and Singapore.

The news comes soon after the FATF released an update to the original travel rule for public consultation in February 2021.

Updated: 5-23-2021

Authorities Are Looking To Close The Gap On Unhosted Wallets

Unhosted wallets have started to attract increasing attention from regulators, with FinCEN and the FATF seeking to control.

Individuals have different choices when it comes to storing their cryptocurrencies. They can use a hosted wallet (sometimes called a custodial wallet), which involves an intermediary (a host) that usually receives, stores and transmits the assets on behalf of their clients.

For example, a centralized crypto exchange can be a hosted wallet provider, with which an individual sets up an account/wallet.

In such cases, the value stored belongs to the account holder, but the funds are controlled by the wallet provider/host (pursuant to the contractual arrangement and instructions from the client).

Alternatively, cryptocurrencies can be stored in an unhosted wallet (sometimes called also a self-hosted, or non-custodial, wallet), which is effectively software installed on a computer, phone or other devices. The funds in an unhosted wallet are controlled by an individual, without the need for an intermediary, similar to the real cash in a physical wallet.

Users of unhosted wallets can usually interact directly with a digital currency system without the involvement of a financial institution, service provider or another intermediary. Users of unhosted wallets can receive, send and exchange their crypto assets with other unhosted wallets, or on an exchange platform, without revealing their identity. Naturally, transactions involving unhosted wallets are more difficult to trace and scrutinize for Anti-Money Laundering and Counter-Terrorism Financing compliance.

Unhosted wallets have now started to attract increasing attention and scrutiny from authorities. The Financial Crimes Enforcement Network (FinCEN) — the United States authority with a mandate to protect the financial system from illicit use, money laundering and terrorism financing, and to promote national security — expressed the view that transactions using unhosted wallets increase AML/CTF risks.

Its concerns also relate to wallets hosted by a foreign financial institution not subject to effective AML regulation — “otherwise covered wallets” — for example, from countries such as Burma or North Korea. The Financial Action Task Force (FATF), the intergovernmental policy-making body that monitors and sets international standards for AML/CTF rules, has similar concerns.

Even though data on public blockchain networks tends to be open and transparent, and could be used to help trace network activity, authorities like FinCEN do not consider this sufficient for mitigating the risks of unhosted wallets.


In December 2020, FinCEN issued a proposal called “Requirements for Certain Transactions Involving Convertible Virtual Currency or Digital Assets,” with a broader aim to address the illicit finance threat perceived to be brought on by unhosted or covered wallets. FinCEN proposed establishing a new reporting and recordkeeping requirements, similar to the rules for traditional funds transfers.

The new requirements would be applicable to transactions involving unhosted or otherwise covered wallets, including deposits, withdrawals, exchanges, and other payments or transfers of convertible virtual currency or digital assets with legal tender status (central bank digital currencies) through a bank or money service businesses (MSBs).

According to the proposal, if a transaction exceeds $10,000 (or is one of multiple transactions within a 24-hour period that, in aggregate, exceeds that amount), the bank or an MSB will have to file a report with FinCEN and include certain information in relation to the transaction, the counterparty (name and physical address) and a verification of the identity of its customer. If a transaction exceeds $3,000, banks and MBSs will be required to keep records of the transaction and counterparty, including verifying the identity of their customer.


Shortly afterward in March 2021, the FATF issued a draft guidance for a risk-based approach to virtual assets (VA) and virtual asset services providers (VASPs). It recommends that virtual asset transfers to or from unhosted wallets should be treated as higher-risk transactions by VASPs and should be subject to enhanced scrutiny and limitations.

The FATF also recommends that individual countries should understand how peer-to-peer transactions are being used in their jurisdiction, and what the potential money laundering and terrorism financing from such transactions.

If these risks are considered unacceptably high, countries should aim to improve the visibility of P2P transactions and limit their exposure to them. They could achieve this through measures such as issuing guidance or imposing controls, equivalent to currency transaction reports or reporting of cross-border instrument transfers.

The FATF is very explicit that its recommendations do not place AML/CTF obligations on individuals, but on intermediaries between individuals and the financial system. Therefore, pure P2P transactions would not be subject to those obligations.

However, in the case of VA transfers where only one party is an obliged entity — like a VASP, and the other is an unhosted wallet, for example, the FATF recommends that such virtual assets transfers are treated as higher-risk transactions by VASPs.

The FATF is effectively seeking to extend the application of the Travel Rule to VASPs if a virtual asset transfer involves an unhosted wallet.

If a country considers the risks from P2P transactions unacceptably high, the FATF also recommends mitigating measures including enhancing on-site and off-site supervision or denying licensing to VASPs that enable unhosted wallet transactions.

Countries may also oblige VASPs to accept transactions only to and from other VASPs, or place additional recordkeeping and due diligence requirements on those VASPs that accept transactions with unhosted wallets.

Countries are also directed to consider additional limitations, controls or prohibitions targeting unhosted wallets. VASPs could choose to limit or prohibit transactions to and from unhosted wallets, or to or from wallets that previously carried out P2P transactions.

Beyond FinCEN And The FATF

FinCEN and the FATF are not the only authorities seeking to close the gap on unhosted wallets. For example, Switzerland and the Netherlands have already introduced stricter controls.

The Swiss Financial Market Supervisory Authority already imposes stricter requirements on transactions above 1,000 Swiss francs (approximately $1,020) involving private wallets. These requirements include identification of the party, establishing the beneficial owner and verifying such party’s power of disposal over external wallets.

In the Netherlands, the Dutch National Bank (DNB) now requires that crypto service providers looking to officially register with the central bank must demonstrate their compliance with verification requirements under the 1977 Sanctions Act.

It involves establishing the identity and place of residence of the counterparty, screening it against the sanctions lists and establishing that this person or legal entity is actually the recipient or the sender. This additional requirement has been met with a lot of criticism and is now being challenged in court.


FinCEN and the FATF seem to have aligned their approach to unhosted wallets. Their proposals have yet to be finalized and have been met with intense debate and criticism. The FinCEN proposal alone received over 7,700 comments. Initially, FinCEN controversially allowed only 15 days for comments, justifying such a short consultation period with their foreign affairs function, significant national security imperatives and previous engagements with the cryptocurrency industry.

However, in mid-January 2021, FinCEN reopened the comment period for additional 15 days for reporting requirements, and 45 days for recordkeeping and counterparty reporting obligations. By the end of January 2021, FinCEN further extended the comments period for another 60 days; comments were closed by March 29. On the other hand, the FATF consultation period ended on April 20.

A number of concerns have been raised by the stakeholders, including legal, procedural, technical and ethical issues. There are privacy issues, since uncovering an identity behind an unhosted wallet would reveal an entire log of transactions recorded on a public network, which far exceeds the information that is being collected under the Travel Rule in traditional banking transactions.

New rules would subject service providers to additional compliance obligations with regard to parties that are not their clients, and would also force individuals to disclose personal information to their counterparty’s service provider. It is not unlikely that some service providers would choose not to support transactions with unhosted wallets to avoid additional compliance burden, which would effectively amount to an indirect ban on such transactions.

There are also a number of technical and operational issues with the implementation of these requirements. For example, DNB suggested solutions for screening counterparties that include screen sharing or video conferencing at the time of logging in, signing a transaction or sending back a small amount of crypto to the provider on request, all of which raise many issues on their own and seem unfeasible.

New rules could also undermine financial inclusion as unhosted wallets provide opportunities for access to financial services for unbanked or underbanked population. Imposing strict controls on unhosted wallets could also complicate things like charitable fundraising in crypto funds, since the charities do not control who makes donations and donors often wish to remain anonymous.

As the crypto market stands at around a $2 trillion market capitalization following the recent incredible bull run, there are a lot of interests at stake when it comes to additional compliance requirements. The stakeholders eagerly await the final word from FinCEN and the FATF.

Updated: 5-27-2021

FinCEN’s New Head Says Controversial Trump-Era Crypto Proposal Is Still Pending

“Nothing’s been decided,” says Michael Mosier, the former Chainalysis counsel who became acting head of the financial crime-fighting agency this year.

The cryptocurrency industry doesn’t have to worry about an overly burdensome U.S. regulation on unhosted, or private, wallets just yet.

“Nothing’s been decided” on the Financial Crimes Enforcement Network’s (FinCEN) proposed rule to collect counterparty data for transactions to unhosted wallets and require currency transaction reports (CTRs) for transactions over $10,000, the acting head of the regulatory agency said Thursday.

FinCEN continues to engage with the cryptocurrency industry about the controversial proposed rule, which critics claim would make it difficult – if not impossible – to use certain smart contracts and otherwise impose a heavy compliance burden on exchanges, said Acting Director Michael Mosier in a pre-recorded interview with Jill Carlson at CoinDesk’s Consensus 2021 conference.

The rule was proposed at the end of 2020 with support from former Treasury Secretary Steven Mnuchin. An originally brief public comment period on the proposal was extended in January, before a second extension gave industry participants 90 days to respond.

“There was a point where there was a really strong sense of urgency among political leadership in the last administration for a variety of factors on timing and what the risks and concerns were to address this,” Mosier said Thursday. “And I think what you saw was the moment we were given the ability to extend that comment period we did, and continued on with our engagement with industry on that.”

Mosier is one of a number of regulators reviewing the last presidential administration’s actions. The Office of the Comptroller of the Currency announced last week that it was reviewing actions undertaken in 2020 by its former head – Acting Comptroller Brian Brooks – as well.

Mosier became the acting head of the domestic financial law enforcement agency this year, succeeding Kenneth Blanco who abruptly stepped down. While he’s been a longtime public servant – working as a state and federal prosecutor prior to his roles at FinCEN – Mosier has also spent time in the private sector, first as an attorney in the technology practice of a law firm, and later as chief technical counsel at crypto analytics firm Chainalysis.

He told Carlson his view of his role stems from his interest in personal sovereignty and innovation, and protecting individuals from financial abuse or having their privacy invaded.

“I sort of went into the path of public service doing pro bono work for victims of domestic violence, to help them get protective orders,” he said. “And that really sort of put me more in the personal sovereignty space.”

Many individuals were abused financially, Mosier said, and so privacy and personal sovereignty may be two tools to help protect individuals.

“Money is a great enabler of a lot of opportunity, but it’s also an enabler and a driver of a lot of exploitation,” Mosier said. “How do you balance that transparency, that’s going to allow people to have faith in the system that they’re dealing with and that they’re not going to be exploited in it … versus having this sort of mix of privacy but also that’s not unaccountable anonymity?”

Financial Intelligence Unit

Part of FinCEN’s mandate as a Financial Intelligence Unit (FIU) is to look for trends or risks by analyzing data, Mosier said.

The agency can also be tasked with studying specific incidents. Mosier referred to the riots that occurred at the U.S. Capitol on Jan. 6 as one issue that FinCEN could study. A blogger sent just over 28 BTC to 22 wallets linked to far-right individuals and entities ahead of the riot.

“There was cryptocurrency involved … [about] $500,000, which actually is more than enough to fund something like [the riot],” he said. “And that’s the sort of thing that activates Congress.”

It turned out the crypto landed in hosted wallets (wallets linked to exchanges), but Mosier said Congress may ask how he is watching for other potential domestic terrorist attacks and the possible use of crypto.

Ransomware attacks on critical infrastructure like hospitals is another similar issue that FinCEN must watch for, he said, indicating that if FinCEN can proactively spot and address these concerns, it could prevent overly burdensome regulations from being implemented.

“When Congress acts, it’s very difficult to undo anything they do or modulate it, whereas if we can say, ‘Well, actually, we’re making a lot of progress,’ which doesn’t necessarily mean a rulemaking at all, it just means that we’re coming up with solutions. That’s the place where you want to be,” he said.

Industry Engagement

FinCEN’s proposed rulemaking drew a “very strong outpouring” of criticism after the agency introduced it, Carlson noted, asking how the crypto industry can better engage with policymakers who are designing regulations around the 12-year-old industry.

“It’s important to understand that not everybody in government is inherently suspicious of crypto,” Mosier said. “There’s a lot of people that are very interested in it and feel like it has incredible potential, including on the financial inclusion side, but also just the technical solution to a lot of policy issues.”

Industry participants should engage with those policymakers who are either pro-crypto or at least curious about the technology “in a non-negative way” to help them understand what the technical solutions to certain policy questions would look like.

They should also acknowledge the risks in these conversations, Mosier’s said, joking:

“Twitter might not be as conducive to that.”

Some of these government employees have been looking at crypto since 2011, he said.

“Don’t just send us your lawyers,” he said. “Send in the technical experts, the core developers.”

Updated: 6-5-2021

US Congressman Expresses Importance Of Crypto Wallet Privacy

Cynthia Lummis and Warren Davidson speak on Bitcoin’s importance and personal privacy during an interview at Bitcoin 2021 in Miami.

At the bustling Bitcoin 2021 conference in Miami, Congressman Warren Davidson, alongside United States Senator Cynthia Lummis, sat down to field interview questions. The interview took a turn toward privacy, with Davidson responding with comments on crypto wallets.

“At the end of the year, if you think about it, Secretary Mnuchin was talking about banning private wallets,” Davidson said, responding to a question about the possibility of over-regulation in crypto. “That’s a horrible approach,” he added. “If we don’t protect private wallets, someone is going to try to ban them.”

As Davidson mentioned, December 2020 saw the U.S. Treasury suggest strict overwatch on self-custodied digital asset wallets, with certain specifics, such as calling for more information from users transacting with wallets held away from crypto exchanges.

“I wish the country would take the threat to privacy as seriously as they take the threat to the second amendment,” he said. The second amendment of the U.S. Constitution gives citizens gun ownership rights.

Taking her turn at a response, Lummis noted the importance of teaching U.S. government folks on Bitcoin. “We’re trying to create a financial innovation caucus so we can use it to educate members of the U.S. Senate and their staffs about Bitcoin, its advantages, and why it is just such a fabulous asset to dovetail with the U.S. dollar,” she said. “It can be the underlying network, worldwide, to keep the dollar the global reserve currency, but still allow people to transact in a very freedom-loving way,” she said, adding:

“Whether you’re in Venezuela, where the inflation is outrageous and you’re trying to get your wealth out of the country, you can get it out through Bitcoin. And, the United States, if we get to the point where we’re experiencing the kind of inflation we’ve begun to see this year, we may want that alternative as well.”

In recent years, Venezuela has seen soaring levels of inflation amid a broad economic decline that was partially tied to the oil-price collapse of 2014.

The Bitcoin 2021 conference in Miami thus far has hosted significant action in terms of speakers and discussions. The event will continue for a second day on Saturday.


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Custody Provider Legacy Trust Launches Crypto Pension Plan (#GotBitcoin?)

Vaneck, SolidX To Offer Limited Bitcoin ETF For Institutions Via Exemption (#GotBitcoin?)

Russell Okung: From NFL Superstar To Bitcoin Educator In 2 Years (#GotBitcoin?)

Bitcoin Miners Made $14 Billion To Date Securing The Network (#GotBitcoin?)

Why Does Amazon Want To Hire Blockchain Experts For Its Ads Division?

Argentina’s Economy Is In A Technical Default (#GotBitcoin?)

Blockchain-Based Fractional Ownership Used To Sell High-End Art (#GotBitcoin?)

Portugal Tax Authority: Bitcoin Trading And Payments Are Tax-Free (#GotBitcoin?)

Bitcoin ‘Failed Safe Haven Test’ After 7% Drop, Peter Schiff Gloats (#GotBitcoin?)

Bitcoin Dev Reveals Multisig UI Teaser For Hardware Wallets, Full Nodes (#GotBitcoin?)

Bitcoin Price: $10K Holds For Now As 50% Of CME Futures Set To Expire (#GotBitcoin?)

Bitcoin Realized Market Cap Hits $100 Billion For The First Time (#GotBitcoin?)

Stablecoins Begin To Look Beyond The Dollar (#GotBitcoin?)

Bank Of England Governor: Libra-Like Currency Could Replace US Dollar (#GotBitcoin?)

Binance Reveals ‘Venus’ — Its Own Project To Rival Facebook’s Libra (#GotBitcoin?)

The Real Benefits Of Blockchain Are Here. They’re Being Ignored (#GotBitcoin?)

CommBank Develops Blockchain Market To Boost Biodiversity (#GotBitcoin?)

SEC Approves Blockchain Tech Startup Securitize To Record Stock Transfers (#GotBitcoin?)

SegWit Creator Introduces New Language For Bitcoin Smart Contracts (#GotBitcoin?)

You Can Now Earn Bitcoin Rewards For Postmates Purchases (#GotBitcoin?)

Bitcoin Price ‘Will Struggle’ In Big Financial Crisis, Says Investor (#GotBitcoin?)

Fidelity Charitable Received Over $100M In Crypto Donations Since 2015 (#GotBitcoin?)

Would Blockchain Better Protect User Data Than FaceApp? Experts Answer (#GotBitcoin?)

Just The Existence Of Bitcoin Impacts Monetary Policy (#GotBitcoin?)

What Are The Biggest Alleged Crypto Heists And How Much Was Stolen? (#GotBitcoin?)

IRS To Cryptocurrency Owners: Come Clean, Or Else!

Coinbase Accidentally Saves Unencrypted Passwords Of 3,420 Customers (#GotBitcoin?)

Bitcoin Is A ‘Chaos Hedge, Or Schmuck Insurance‘ (#GotBitcoin?)

Bakkt Announces September 23 Launch Of Futures And Custody

Coinbase CEO: Institutions Depositing $200-400M Into Crypto Per Week (#GotBitcoin?)

Researchers Find Monero Mining Malware That Hides From Task Manager (#GotBitcoin?)

Crypto Dusting Attack Affects Nearly 300,000 Addresses (#GotBitcoin?)

A Case For Bitcoin As Recession Hedge In A Diversified Investment Portfolio (#GotBitcoin?)

SEC Guidance Gives Ammo To Lawsuit Claiming XRP Is Unregistered Security (#GotBitcoin?)

15 Countries To Develop Crypto Transaction Tracking System: Report (#GotBitcoin?)

US Department Of Commerce Offering 6-Figure Salary To Crypto Expert (#GotBitcoin?)

Mastercard Is Building A Team To Develop Crypto, Wallet Projects (#GotBitcoin?)

Canadian Bitcoin Educator Scams The Scammer And Donates Proceeds (#GotBitcoin?)

Amazon Wants To Build A Blockchain For Ads, New Job Listing Shows (#GotBitcoin?)

Shield Bitcoin Wallets From Theft Via Time Delay (#GotBitcoin?)

Blockstream Launches Bitcoin Mining Farm With Fidelity As Early Customer (#GotBitcoin?)

Commerzbank Tests Blockchain Machine To Machine Payments With Daimler (#GotBitcoin?)

Bitcoin’s Historical Returns Look Very Attractive As Online Banks Lower Payouts On Savings Accounts (#GotBitcoin?)

Man Takes Bitcoin Miner Seller To Tribunal Over Electricity Bill And Wins (#GotBitcoin?)

Bitcoin’s Computing Power Sets Record As Over 100K New Miners Go Online (#GotBitcoin?)

Walmart Coin And Libra Perform Major Public Relations For Bitcoin (#GotBitcoin?)

Judge Says Buying Bitcoin Via Credit Card Not Necessarily A Cash Advance (#GotBitcoin?)

Poll: If You’re A Stockowner Or Crypto-Currency Holder. What Will You Do When The Recession Comes?

1 In 5 Crypto Holders Are Women, New Report Reveals (#GotBitcoin?)

Beating Bakkt, Ledgerx Is First To Launch ‘Physical’ Bitcoin Futures In Us (#GotBitcoin?)

Facebook Warns Investors That Libra Stablecoin May Never Launch (#GotBitcoin?)

Government Money Printing Is ‘Rocket Fuel’ For Bitcoin (#GotBitcoin?)

Bitcoin-Friendly Square Cash App Stock Price Up 56% In 2019 (#GotBitcoin?)

Safeway Shoppers Can Now Get Bitcoin Back As Change At 894 US Stores (#GotBitcoin?)

TD Ameritrade CEO: There’s ‘Heightened Interest Again’ With Bitcoin (#GotBitcoin?)

Venezuela Sets New Bitcoin Volume Record Thanks To 10,000,000% Inflation (#GotBitcoin?)

Newegg Adds Bitcoin Payment Option To 73 More Countries (#GotBitcoin?)

China’s Schizophrenic Relationship With Bitcoin (#GotBitcoin?)

More Companies Build Products Around Crypto Hardware Wallets (#GotBitcoin?)

Bakkt Is Scheduled To Start Testing Its Bitcoin Futures Contracts Today (#GotBitcoin?)

Bitcoin Network Now 8 Times More Powerful Than It Was At $20K Price (#GotBitcoin?)

Crypto Exchange BitMEX Under Investigation By CFTC: Bloomberg (#GotBitcoin?)

“Bitcoin An ‘Unstoppable Force,” Says US Congressman At Crypto Hearing (#GotBitcoin?)

Bitcoin Network Is Moving $3 Billion Daily, Up 210% Since April (#GotBitcoin?)

Cryptocurrency Startups Get Partial Green Light From Washington

Fundstrat’s Tom Lee: Bitcoin Pullback Is Healthy, Fewer Searches Аre Good (#GotBitcoin?)

Bitcoin Lightning Nodes Are Snatching Funds From Bad Actors (#GotBitcoin?)

The Provident Bank Now Offers Deposit Services For Crypto-Related Entities (#GotBitcoin?)

Bitcoin Could Help Stop News Censorship From Space (#GotBitcoin?)

US Sanctions On Iran Crypto Mining — Inevitable Or Impossible? (#GotBitcoin?)

US Lawmaker Reintroduces ‘Safe Harbor’ Crypto Tax Bill In Congress (#GotBitcoin?)

EU Central Bank Won’t Add Bitcoin To Reserves — Says It’s Not A Currency (#GotBitcoin?)

The Miami Dolphins Now Accept Bitcoin And Litecoin Crypt-Currency Payments (#GotBitcoin?)

Trump Bashes Bitcoin And Alt-Right Is Mad As Hell (#GotBitcoin?)

Goldman Sachs Ramps Up Development Of New Secret Crypto Project (#GotBitcoin?)

Blockchain And AI Bond, Explained (#GotBitcoin?)

Grayscale Bitcoin Trust Outperformed Indexes In First Half Of 2019 (#GotBitcoin?)

XRP Is The Worst Performing Major Crypto Of 2019 (GotBitcoin?)

Bitcoin Back Near $12K As BTC Shorters Lose $44 Million In One Morning (#GotBitcoin?)

As Deutsche Bank Axes 18K Jobs, Bitcoin Offers A ‘Plan ฿”: VanEck Exec (#GotBitcoin?)

Argentina Drives Global LocalBitcoins Volume To Highest Since November (#GotBitcoin?)

‘I Would Buy’ Bitcoin If Growth Continues — Investment Legend Mobius (#GotBitcoin?)

Lawmakers Push For New Bitcoin Rules (#GotBitcoin?)

Facebook’s Libra Is Bad For African Americans (#GotBitcoin?)

Crypto Firm Charity Announces Alliance To Support Feminine Health (#GotBitcoin?)

Canadian Startup Wants To Upgrade Millions Of ATMs To Sell Bitcoin (#GotBitcoin?)

Trump Says US ‘Should Match’ China’s Money Printing Game (#GotBitcoin?)

Casa Launches Lightning Node Mobile App For Bitcoin Newbies (#GotBitcoin?)

Bitcoin Rally Fuels Market In Crypto Derivatives (#GotBitcoin?)

World’s First Zero-Fiat ‘Bitcoin Bond’ Now Available On Bloomberg Terminal (#GotBitcoin?)

Buying Bitcoin Has Been Profitable 98.2% Of The Days Since Creation (#GotBitcoin?)

Another Crypto Exchange Receives License For Crypto Futures

From ‘Ponzi’ To ‘We’re Working On It’ — BIS Chief Reverses Stance On Crypto (#GotBitcoin?)

These Are The Cities Googling ‘Bitcoin’ As Interest Hits 17-Month High (#GotBitcoin?)

Venezuelan Explains How Bitcoin Saves His Family (#GotBitcoin?)

Quantum Computing Vs. Blockchain: Impact On Cryptography

This Fund Is Riding Bitcoin To Top (#GotBitcoin?)

Bitcoin’s Surge Leaves Smaller Digital Currencies In The Dust (#GotBitcoin?)

Bitcoin Exchange Hits $1 Trillion In Trading Volume (#GotBitcoin?)

Bitcoin Breaks $200 Billion Market Cap For The First Time In 17 Months (#GotBitcoin?)

You Can Now Make State Tax Payments In Bitcoin (#GotBitcoin?)

Religious Organizations Make Ideal Places To Mine Bitcoin (#GotBitcoin?)

Goldman Sacs And JP Morgan Chase Finally Concede To Crypto-Currencies (#GotBitcoin?)

Bitcoin Heading For Fifth Month Of Gains Despite Price Correction (#GotBitcoin?)

Breez Reveals Lightning-Powered Bitcoin Payments App For IPhone (#GotBitcoin?)

Big Four Auditing Firm PwC Releases Cryptocurrency Auditing Software (#GotBitcoin?)

Amazon-Owned Twitch Quietly Brings Back Bitcoin Payments (#GotBitcoin?)

JPMorgan Will Pilot ‘JPM Coin’ Stablecoin By End Of 2019: Report (#GotBitcoin?)

Is There A Big Short In Bitcoin? (#GotBitcoin?)

Coinbase Hit With Outage As Bitcoin Price Drops $1.8K In 15 Minutes

Samourai Wallet Releases Privacy-Enhancing CoinJoin Feature (#GotBitcoin?)

There Are Now More Than 5,000 Bitcoin ATMs Around The World (#GotBitcoin?)

You Can Now Get Bitcoin Rewards When Booking At Hotels.Com (#GotBitcoin?)

North America’s Largest Solar Bitcoin Mining Farm Coming To California (#GotBitcoin?)

Bitcoin On Track For Best Second Quarter Price Gain On Record (#GotBitcoin?)

Bitcoin Hash Rate Climbs To New Record High Boosting Network Security (#GotBitcoin?)

Bitcoin Exceeds 1Million Active Addresses While Coinbase Custodies $1.3B In Assets

Why Bitcoin’s Price Suddenly Surged Back $5K (#GotBitcoin?)

Bitcoin’s Lightning Comes To Apple Smartwatches With New App (#GotBitcoin?)

E-Trade To Offer Crypto Trading (#GotBitcoin)

US Rapper Lil Pump Starts Accepting Bitcoin Via Lightning Network On Merchandise Store (#GotBitcoin?)

Bitfinex Used Tether Reserves To Mask Missing $850 Million, Probe Finds (#GotBitcoin?)

21-Year-Old Jailed For 10 Years After Stealing $7.5M In Crypto By Hacking Cell Phones (#GotBitcoin?)

You Can Now Shop With Bitcoin On Amazon Using Lightning (#GotBitcoin?)

Afghanistan, Tunisia To Issue Sovereign Bonds In Bitcoin, Bright Future Ahead (#GotBitcoin?)

Crypto Faithful Say Blockchain Can Remake Securities Market Machinery (#GotBitcoin?)

Disney In Talks To Acquire The Owner Of Crypto Exchanges Bitstamp And Korbit (#GotBitcoin?)

Crypto Exchange Gemini Rolls Out Native Wallet Support For SegWit Bitcoin Addresses (#GotBitcoin?)

Binance Delists Bitcoin SV, CEO Calls Craig Wright A ‘Fraud’ (#GotBitcoin?)

Bitcoin Outperforms Nasdaq 100, S&P 500, Grows Whopping 37% In 2019 (#GotBitcoin?)

Bitcoin Passes A Milestone 400 Million Transactions (#GotBitcoin?)

Future Returns: Why Investors May Want To Consider Bitcoin Now (#GotBitcoin?)

Next Bitcoin Core Release To Finally Connect Hardware Wallets To Full Nodes (#GotBitcoin?)

Major Crypto-Currency Exchanges Use Lloyd’s Of London, A Registered Insurance Broker (#GotBitcoin?)

How Bitcoin Can Prevent Fraud And Chargebacks (#GotBitcoin?)

Why Bitcoin’s Price Suddenly Surged Back $5K (#GotBitcoin?)

Zebpay Becomes First Exchange To Add Lightning Payments For All Users (#GotBitcoin?)

Coinbase’s New Customer Incentive: Interest Payments, With A Crypto Twist (#GotBitcoin?)

The Best Bitcoin Debit (Cashback) Cards Of 2019 (#GotBitcoin?)

Real Estate Brokerages Now Accepting Bitcoin (#GotBitcoin?)

Ernst & Young Introduces Tax Tool For Reporting Cryptocurrencies (#GotBitcoin?)

How Will Bitcoin Behave During A Recession? (#GotBitcoin?)

Investors Run Out of Options As Bitcoin, Stocks, Bonds, Oil Cave To Recession Fears (#GotBitcoin?)

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