FinCEN Extends Comment Period for Controversial Crypto Wallet Rule
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 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 15-day 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 reporting 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.”
UPDATE (Jan. 14, 2021, 20:40 UTC): Adds context and industry feedback throughout.