Cryptocurrencies

In the US, the proposed crypto wallet law would be ineffective – Cryptocurrencies

Two weeks into the new year 2021, the Financial Crimes Enforcement Network (FinCEN) dropped a bomb in the crypto space with the announcement of a new law. This recommends that all crypto-exchange customers must now comply with the requirements of the KYC procedure. The proceeding gave the public as well as the various actors the opportunity to comment on the relevance of this measure until January 04, 2021. A right of reply which has been exercised in particular by the blockchain analysis company Elliptic. She did not fail to attack the proceedings thus qualifying his latest bill ineffective.

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A decline in the fight against money laundering and the financing of terrorism (AML / CFT)

The FinCEN bill targeted transfers to private crypto wallets for transactions over $ 3,000. It also provided that exchanges will have to declare all individual or group transactions with a total amount greater than $ 10,000. So many measures that could undermine the effectiveness of existing anti-money laundering and anti-terrorist financing (AML / CFT) regulations. This is notably the point of view of society Elliptical who finds the decision of the body untimely adding that it overestimates the risks offered by non-hosted portfolios.

Recalling that the analysis of the ledger of the associated blockchain already makes it possible to trace a transaction, Elliptical says the new law would only add additional documentation costs. There are also other concerns about the repercussions of this law, in particular with regard to the mode of financing of DeFi. Added to this is the incomprehension that reigns around the term unhosted wallets that many experts find ill-defined by law. They also ask themselves whether public financial institutions should collect this information from their counterparties.

Rules that would impose an unjustified tax on financial innovation

Regarding non-hosted wallets, Elliptic showed that less than 10% of funds of illicit origin were housed there and the rest were in dormant accounts. As the holders of these accounts will inevitably one day convert their holdings into fiat, the company recalled that FinCen might already have the information about them with the Suspicious Activity Reports (SAR).

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Elliptical then indicated in its response that the application of these new rules would require an unjustified tax on financial innovation and that these should simply be deleted. Finally, the company regretted the excessively short time granted to the community to comment on the proposal of the FinCen. From 15 days, this period should finally be extended to 90 days in order to allow everyone to give their opinion.

Until these manifest themselves further, the current trend seems to be more of disapproval in the crypto space. While these are the last steps of the Trump era, all eyes are now on the Biden administration, whose position on this matter is still unclear.

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