The U.S. Financial Crimes Enforcement Network (FinCEN) has proposed a rule that would instill record keeping and reporting requirements for transactions by or to a bank or money service business involving an “unhosted or otherwise covered wallet. The proposed rule, entitled “Requirements for Certain Transactions Involving Convertible Virtual Currency or Digital Assets,” would subject self-hosted wallets to heightened anti-money laundering standards if enacted, meaning anonymous transacting could become a thing of the past.
The rule calls for enhanced KYC requirements for withdrawals over $3,000.
The U.S. financial crimes agency proposes to define those wallets as “those wallets that are held at a financial institution that is not subject to the Bank Secrecy Act and is located in a foreign jurisdiction identified by FinCEN.” The proposed rule calls for enhanced know-your-customer requirements for withdrawals over $3,000. For transactions larger than $10,000, firms would have to report to FinCEN. It would require banks and MSBs to file information on a customer’s transaction and their counterparty, including names and physical addresses, to verify both parties’ identities. The proposed rule is a threat to privacy on transactions that comes with dealing in cryptocurrencies.
The newly proposed rule is in line with the FATF’s Travel Rule.
FinCEN is also proposing rules around “structuring,” which entails breaking large transactions into smaller ones in order to get around reporting requirements. The U.S agency wants to make sure no one transacts anonymously. The newly proposed rule is in line with the Financial Action Task Force’s Travel Rule, which calls for trading venues to share exchange originator and beneficiary identity information for exchange-to-exchange transactions greater than $10,000. U.S. exchanges have been working to meet the challenges presented by the rule.