FinCEN Releases New Proposed KYC Rules For Cryptocurrency Wallets

Rumors have been spreading in the community for weeks regarding the fact that the United States Department of the Treasury is considering introducing regulations related to cryptocurrency wallets. All of these speculations have come true as the bureau of the US Treasury Department the Financial Crimes Enforcement Network (FinCEN) has moved one step close to imposing cryptocurrency wallet regulations.

The United States FinCEN has proposed a new set of rules for cryptocurrency wallets. These proposed rules will require all of the users in the United States whose holdings are stored in self-hosted wallets to show compliance to these new Know Your Customer (KYC) requirements. The new proposed rule is called “Requirements for Certain Transactions Involving Convertible Virtual Currency or Digital Assets”.

Once this new rule is enacted, money service businesses (MSBs) and banks will be required “to submit reports, keep records, and verify the identity of customers in relation to transactions involving convertible virtual currency (“CVC”) or digital assets with legal tender status (“legal tender digital assets” or “LTDA”) held in un-hosted wallets, or held in wallets hosted in a jurisdiction identified by FinCEN,” the official press release stated.

Cryptocurrency exchanges would be required to maintain a record of transactions that will exceed $3000 in total value. On the other hand, those users whose transaction value exceeds $3000 would also be required to provide personal information. They will be needed to show compliance to the new proposed rule in the case if they intend to move their digital asset holdings from centralized digital currency exchanges to self-hosted or private wallets. Crypto exchanges will instantly have to report records of those transactions that exceed $10,000 in value within the duration of 24 hours.

Currently, the agency of the US Treasury Department is seeking public comments on this newly-proposed rule until the 4th of January 2021.

Malicious actors are increasingly making use of CVC for accommodating illicit purposes such as “weapons proliferation, international terrorist financing, transnational money laundering, sanctions evasion”, and others, according to the regulatory authorities of the United States. FinCEN said that the main intention behind this proposal is to develop some proper controls in order to ensure the protection of the national security of the United States from threats such as cybersecurity and ransomware attacks.

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