CRYPTO MOVERS AND PRICES
Bitcoin (BTC) is seeing its worst decline since breaking above USD 20,000 decisively last week. Spot volumes have spiked on the move.
Crypto Story of the Day
On Friday, the U.S. Treasury Department released draft rules regarding “requirements for certain transactions involving convertible virtual currency or digital assets.” The new rules would introduce new transaction reporting and KYC procedures for crypto involving certain entities. These rules have largely been met with criticism from the crypto community.
The rules, foreshadowed by Coinbase CEO Brian Armstrong at the end of November, are up for comment for 15 days starting today. They would be implemented by FinCEN and seek to address the perceived illicit “finance threat” posed by 2 types of digital assets: convertible virtual currency, or CVCs (BTC, ETH, LTC), and legal tender digital assets, or LTDA. This second group is described as “digital assets with legal tender status.”
Though FinCEN is considering expanding the rules to other entities, the rules currently seek to have banks or money service businesses adopt recordkeeping, verification, and reporting requirements for certain transactions with “unhosted wallets,” or wallets where the user possesses their own private keys. Banks or MSBs would be required to record information like physical address and name of customer if a transaction exceeds USD 3,000 in value. If the transaction exceeds USD 10,000, the bank or MSB must file a report with FinCEN with the aforementioned information.
The rules also introduce a new prohibition on structuring, the act of engaging in transactions in order to avoid reporting requirements. The new rules were largely met with criticism from the crypto community, not only because of their substance, but also due to the short 15-day comment period at an awkward holiday time.
Leading up to Armstrong’s statements on Twitter, there had been existing anxiety surrounding potential regulation of unhosted wallets. The introduction of the STABLE Act contributed to these worries. Brian Brooks, the head of the Office of the Comptroller of the Currency, sought to placate anxieties, stating that “nobody’s going to ban bitcoin.”
In the end, the Treasury’s draft rules have fallen short of some of these worst fears, but will have mixed implications for the space. The rules wouldn’t hinder the transfer of funds from one private, non-commercial, unhosted wallet to another. Also, the information required to be collected is already relatively accessible. All U.S. exchanges already implement KYC rules, and any deposits or withdrawals are recorded on various blockchains. The challenges that these rules pose to crypto come in their vagueness regarding specific circumstances, such as the withdrawal of funds to smart contracts or the associated costs that exchanges will have to bear.
In the end, while the rules aren't as drastic as some had anticipated, they also shouldn’t come as a surprise. We never anticipated that crypto adoption would come with full Government sympathy for anonymous peer-to-peer transactions and there are certainly stricter regulations imaginable.