By
Temitope Olatunji
April 18th, 2024
Coinbase spoke against the regulation referring to it as a “regulation not done properly.” According to them, the required information needed to make transactions does not achieve the goal or purpose of controlling illicit transactions.
The Financial Crimes Enforcement Network (FinCEN) recently proposed regulations that will see exchanges and people identifying themselves when making transactions above a stated amount. According to reports, some major crypto firms have kicked against this new AML regulation for reasons of driving enthusiasts away from the US crypto sector.
Jack Dorsey, the CEO of Twitter Inc (NYSE: TWTR), and Square Inc (NYSE: SQ) believes that the regulations that demand exchanges and companies to report the information of the parties involved in crypto transactions are far beyond what is required to facilitate cash transactions in the recent era.
Looking at the bigger picture, Dorsey believes that this will affect the cryptocurrency sector of the country as people would be forced to move from regulated entities like Square to unsafe and non-custodial private wallets outside the country coupled with the collection of unreliable data from customers.
FinCEN, after publishing the proposal on December 18, 2020, received a lot of criticism, and comments near 6000 addressed to them despite offering just 15 days for public comments compared to the usual 60 days.
On top of the comment by Dorsey against the proposal, Kraken, a cryptocurrency exchange based in the US has also blasted FinCEN for not highlighting the cost of Implementing the said rule in their submission. Kraken stated that the decision will make it difficult for FinCEN to get access to the evidence available to them today in the future.
“It is quite clearly a politically-motivated piece of midnight rulemaking, the publication of which diminishes the trust we have placed in FinCEN,” they added.
Coinbase also spoke against the regulation referring to it as a “regulation not done properly.” According to them, the required information needed to make transactions does not achieve the goal or purpose of controlling illicit transactions. According to Coinbase, the required information has no analogue in traditional finance and also raises privacy and security concerns. They also referred to the 15 days given for public opinion as unfair as it has two federal holidays and two weekends.
15 days is too short to correctly go through a 72-page notice of rulemaking. Coinbase, therefore, charged the Treasury to withdraw the proposed rules and engage the industry without compromising the integrity of the cryptocurrency ecosystem and privacy of users.
What the FinCEN Regulations Say
The proposed regulation requires an individual signed up on a trading platform or exchange and attempts to send more than $3000 to a private wallet to identify the receiver by providing data of his name and physical address. The exchange will be required to keep records of these details and report them in due time.
Also, if an individual makes a transaction above $10,000 in a day, the exchange would be required to report the personal information of the individual. It is expected that the criticisms from the industry big players against the proposed regulations would force authorities to reconsider the requirement or do as the Coinbase legal team suggested.