A new transaction reporting law for money services businesses that connect with self-hosted crypto wallets is about to be put out by the US Treasury Department, The Block reported, citing unidentified sources. They supposedly believed that this regulation would be made public shortly, probably this Friday, in the form of a proposed rule-making notice or an interim final rule. A public comment period is planned after that, which may be a chance for the crypto industry to share their views.
According to the law, MSBs will need to file a currency transaction report if a client is performing a crypto transaction to/from a wallet that includes their service and is above a threshold that has yet to be disclosed, said the article, adding that the language is still not set-in stone. Regulated financial institutions are expected to document currency transactions above USD 10,000, according to the financial crime watchdog inside the US Treasury Department, the Financial Crimes Enforcement Network.
The speculation started late last month when Brian Armstrong of Coinbase posted a thread on Twitter warning the U.S. Treasury is working on a rule that might make it harder for those without an ID or those who deny KYC to use their own wallets. “This proposed regulation would, we think, require financial institutions like Coinbase to verify the recipient/owner of the self-hosted wallet, collecting identifying information on that party, before a withdrawal could be sent to that self-hosted wallet.”
Incoming Wyoming Senator Cynthia Lummis announced on Friday morning that she has begun work on the “rumored transaction reporting rule impacting digital assets” because she feels that this is a bad decision on the part of the Treasury: “I am deeply concerned that the Treasury Department is considering a hasty rule governing self-hosted digital asset wallets and the Bank Secrecy Act. Rather than prematurely adopting a rule on this complex topic, Treasury should immediately begin a transparent process to engage with Congress and industry, building a consensus to drive America forward.”
Lummis shared that she had advised Secretary Mnuchin that all of the actions that are speculated could harm fintech competition with China and Russia, while also reducing financial inclusion. “A hallmark feature of digital assets, like BTC, is the ability to conduct transactions w/out an intermediary. This promotes financial inclusion and freedom. A rule adopted at this juncture would be a solution in search of a problem. More pressing BSA-related issues exist.”
For a while, Lummis has been a Bitcoin and cryptocurrency advocate, naming BTC a viable alternative to gold. In several national television interviews, she has discussed why she supports the leading cryptocurrency.
“Treasury has the authority to regulate MSB. But where would they derive authority to regulate individuals or P2P [peer-to-peer] internet transactions?” commented Alex Thorn, investor at BTC and blockchain-focused venture capital fund Avon Ventures. According to cryptonews.com, Alex Gladstein, Chief Strategy Officer of the Human Rights Foundation, said that there is a lot of “Trump Bitcoin Ban” by Mnuchin on his way out a limit on self-hosted wallets,” arguing that Americans should be concerned about this and push back against such a breach of civil liberties, but also that “no it won’t stop or ruin Bitcoin.” Yet at the same time, many argue against the use of the word “self-hosted wallet” since it is actually a personal wallet owned by an individual vs. placing money into the “hosted” wallet of someone else and trusting them with it. Describing self-custody is made-up words,”It’s made-up language to describe self-custody,”
