FinCEN’s Crypto Wallet Rules, a controversial regulation proposal on “Unhosted” Crypto Wallet (convertible virtual currency (CVC) or digital assets with legal tender status (LTDA) wallets not hosted by a financial institution) has been effectively frozen by President Joe Biden as his administration takes office today.
United States, Jan 21, 2021 /AlexaBlockchain/ – On day one, US President Joe Biden signed 17 orders to freeze Trump administration policies, including the controversial self-hosted crypto wallet regulations proposed by former Treasury Secretary Steven Mnuchin. The proposed FinCEN’s Crypto Wallet Rules were also highly criticized by the industry leaders.
The announcement came in a White House memorandum for the heads of executive departments and agencies dated January 20, 2021, the Financial Crimes Enforcement Network (FinCEN) included. The memorandum 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 proposal related to self-hosted wallet was officially submitted by FinCEN on December 18 under former US Treasury Secretary Mnuchin. If passed it would require banks and money service businesses (MSBs) to submit reports, keep records, and verify the identity of customers in relation to transactions above certain thresholds involving CVC/LTDA wallets not hosted by a financial institution (also known as “unhosted wallets”) or CVC/LTDA wallets hosted by a financial institution in certain jurisdictions identified by FinCEN.
Initially, the Trump administration offered only 15-day comment period on the rule, compared to the standard 60 day period. Many believe it was an attempt by Mnuchin to pass the regulation before his time of oversight expired. Following an outcry of protests by the crypto community which included prominent figures and major exchanges, the comment period was extended earlier this month.
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.
Ravi Kumar, Market Analyst at AlexaBlockchain, last month criticized:
“It would be technically impossible for many projects to comply because smart contracts do not contain name or address information. People in the policy making need to consult the experts in the industry before making such law. Stopping Money Laundering is a big challenge, but blaming and restricting an evolving technology is certainly not the right approach.”
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 selected Gary Gensler to serve as chairman for the U.S. Securities and Exchange Commission (sec.gov) who also teaches a class on blockchain technology at MIT.
As per the profile mentioned on MIT website: Gary Gensler is Professor of the Practice of Global Economics and Management, MIT Sloan School of Management, Co-Director of MIT’s Fintech@CSAIL & Senior Advisor to the MIT Media Lab Digital Currency Initiative. He conducts research and teaches on blockchain technology, digital currencies, financial technology, and public policy.
Ravi commented that we need people in policy making with understanding of Blockchain and crypto, and added:
“Gensler can be a positive force for the blockchain and crypto regulation in the US and for the rest of the world. He is as knowledgeable about the crypto market as anyone in the industry, so I believe his appointment as SEC Chairman can be the beginning of a new chapter in the digital economy.
