- Community members have criticized the initiative as a number of digital wallets are technically unable to meet KYC requirements.
- FinCEN plans to finalize the rule in August
- ZenGo Wallet CEO Ouriel Ohayon reiterated that FinCEN’s requirements are unfeasible.
In 2022, the United states Department of the Treasury will return to consider the controversial FinCEN proposal , which requires mandatory verification of users of non-custodial cryptocurrency wallets. This is stated in the semi-annual work plan of the structure.
“FinCEN proposes changes to the rules implementing the Bank Secrecy Act (BSA) to require banks and money services to report, maintain records, and verify the identity of customers in transactions with convertible virtual currency (CVC) or digital assets with legal tender status, stored in non-hosted wallets or wallets hosted in a jurisdiction determined by FinCEN,” the Federal Register website says.
The agency first put forward the proposal at the end of 2020. The document was developed by Steven Mnuchin, who then served as Secretary of the Treasury. Community members have criticized the initiative as a number of digital wallets are technically unable to meet KYC requirements. Some also noted that the rule would become burdensome for individuals.
According to the review schedule, FinCEN plans to finalize the rule in August, but publication does not guarantee that it will not change in the process.
If the offer is accepted in its original form, cryptocurrency exchanges will be required to collect the names, addresses and other personal data of users transferring digital assets to non-custodial wallets. ZenGo Wallet CEO Ouriel Ohayon reiterated that FinCEN’s requirements are unfeasible.
“If they understood how wallets work, they would know that the concept of a “user account” does not exist, and therefore KYC cannot be done in a systematic way,” he wrote.
FinCEN also plans to “clarify the term “money”” under the BSA in relation to digital assets. The agency believes that transactions with them should be regulated in accordance with the same rules as transactions with fiat currencies.
“According to the agency, the revised proposal will ensure that the rules apply to domestic and cross-border transactions with a convertible virtual currency that is a medium of exchange (for example, cryptocurrency), has an equivalent value as a currency, or acts as a substitute for a currency, but does not have the status of legal tender “, — said in the publication.
Recall that in November 2021, US Treasury Secretary Janet Yellen stated that the FATF rules are consistent with the FinCEN rules regarding the regulation of cryptocurrencies.
WHAT IS FinCEN (US)?
FinCEN was established by order of the Secretary of the Treasury (Treasury Order Numbered 105-08) on April 25, 1990. In May 1994, its mission was broadened to include regulatory responsibilities, and in October 1994 the Treasury Department’s precursor of FinCEN, the Office of Financial Enforcement was merged with FinCEN. On September 26, 2002, after Title III of the PATRIOT Act was passed, Treasury Order 180-01 made it an official bureau in the Department of the Treasury.
Since 1995, FinCEN employs the FinCEN Artificial Intelligence System (FAIS).
In September 2012, FinCEN’s information technology called FinCEN Portal and Query System migrated with 11 years of data into FinCEN Query, a search engine similar to Google. It is a “one stop shop” [sic] accessible via the FinCEN Portal allowing broad searches across more fields than before and returning more results. Since September 2012 FinCEN generates 4 new reports: Suspicious Activity Report (FinCEN SAR), Currency Transaction Report (FinCEN CTR), the Designation of Exempt Person (DOEP) and Registered Money Service Business (RMSB).