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FinCEN Forced by Crypto Community to Hold Off Its Controversial Proposal

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Tue, 01/26/2021 - 15:45
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Vladislav Sopov
Coordinated resistance by crypto community forces the U.S. watchdog to allow more time for comments to its rulemaking proposal
FinCEN Forced by Crypto Community to Hold Off Its Controversial Proposal
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The United States Financial Crimes Enforcement Network (FinCEN) decided to extend the comment period for its most alarming proposal regarding the crypto and blockchain segments. Now, all crypto enthusiasts can send their comments through late March of this year.

Sixty more days for discussion

According to the official statement released by FinCEN on Jan. 26, 2021, the comment period for its rulemaking proposal regarding "unhosted wallets" is extended by 60 days starting from today. Earlier this month, this period had been lengthened for 15 days amidst massive criticism from crypto enthusiasts.

FinCEN allows 60 more days for comments on rulemaking proposal
Image by FinCEN

This proposal, initially published on Dec. 18, 2020, with a shortened comments period, includes draconian regulatory measures against crypto services. For instance, it proposed the implementation of KYC checks for every transaction greater than $3,000 in equivalent and obligatory reporting to FinCEN for every transactionor even series of transactions in 24 hoursthat exceeds $10,000 in equivalent.

The document was designed to regulate interaction with "self-hosted" wallets. Meanwhile, it is still unclear how to track and report transactions from smart contracts or decentralized applications.

FinCEN's initiative prompted a tough response from the crypto community. Even ideological rivals, e.g., Coinbase exchange and the Monero community, have spoken in one voice against this proposal. The latter published an instruction for crypto enthusiasts on how to respond to the new proposal in written form.

It may be too early to celebrate

CoinCenter, a digital assets advocacy think tank, played an important role in opposing this FinCEN initiative. Meanwhile, its research director Peter Van Valkenburgh is certain that this battle is far from over.

According to him, hopes for a post-Trump FinCEN administration were dashed and the regulator's new team still has plans to introduce new rules:

Another 60 day extension for the entire midnight rule-making subject-matter (both the CTR requirements and the proposed record-keeping rule). Seems to confirm what we had feared: this rule-making was *not* frozen by new admin.

At the same time, for him, there is an opportunity to narrow the proposal to only reporting transactions "100 percent equivalent" to those triggered by the equivalent of $10,000 in fiat transactions in banks.

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About the author

Blockchain Analyst & Writer with scientific background. 5+ years in IT-analytics, 2+ years in blockchain.

Worked in independent analysis as well as in start-ups (Swap.online, Monoreto, Attic Lab etc.)