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Peter Smith,
I sent it last week A letter to the Secretary of Finance Steve Mnuchin on behalf of Blockchain.com (Embedded below), which outlines my concerns about FinCEN’s expected rules related to self-hosted wallets. Since then, FinCEN Published a set of proposed rules This has been widely commented in the field of encryption. The good news is that the proposal announced by FinCEN on Friday is not as onerous as we expected.For a good summary of the proposed rules, I recommend reading the compound general counsel Jake Chervinsky’s Twitter post.
Here are some thoughts on my suggestions for implementing additional restrictions on self-hosted wallets, as stated in my letter. First, these rules may inadvertently undermine the basic goal of addressing money laundering and terrorist financing activities. this Solving the challenges of money laundering in the global financial system It is undoubtedly huge.
Second, these rules may simply divide the industry into rule-compliant suppliers and non-compliant offshore wallet suppliers, thereby putting illegal activities out of the sight of US law enforcement agencies. Unregulated offshore custodial service providers may gain a competitive advantage over AML/KYC regulated providers, so U.S. law enforcement agencies may ultimately lose access to the information they currently have access to.
The financial crime department of Blockchain.com interacts with law enforcement agencies on a daily basis. If we are unable to facilitate transactions between self-hosted wallets and our custodial products, then the flow of transaction traffic will no longer be captured, and we will not be able to provide any requested details to law enforcement agencies. It will only trade elsewhere. We believe that law enforcement agencies are more willing to retain their current visibility into the network.
Next, we believe that self-hosted wallets are beneficial to users. Not only because they provide privacy similar to cash payments, but also because it makes innovation possible. Innovation, like the Internet, offers opportunities only limited by the imagination of entrepreneurs.
Although large and well-capitalized cryptocurrency companies like Blockchain.com currently operate KYC-regulated products in multiple jurisdictions, they can comply with the strictest interpretation of these rules, but we believe that they are not conducive to innovation. Encryption is an emerging and evolving industry. We have talented teams and entrepreneurs across the United States who are innovating but will succumb under the weight of this regulation.We know because We invested in many of them.
Finally, we believe that there is a fairly effective regulatory framework. The activities of MSB and currency transferers are subject to Bank Secrecy Act Everyone must meet strict KYC and anti-money laundering requirements-Blockchain.com alone has conducted KYC on millions of users in the past two years. Third-party intermediaries (banks and payment service providers) are also regulated in accordance with banking and financial services regulations. Therefore, the gaps in the regulatory framework are related to companies operating in the United States, but related to offshore OTC exchanges and brokerage companies. These restrictive regulations will not affect these companies.
As mentioned above, the proposal announced by FinCEN is not as strict as we feared. However, in our opinion, requiring custodial service providers to collect and report the personal information of recipients of non-custodial wallets does not address the key issue here and may have unexpected consequences. Finally, I will state unequivocally that we condemn the illegal use of cryptocurrency to commit any form of crime. We just believe that there are more effective ways to achieve the goals of FinCEN and the US government.
Because of the regulations that apply to escrow providers located in AML and KYC regulatory jurisdictions, it is important to acknowledge that US law enforcement authorities have access to most of the information they need for criminal activities. Given the inherent complexity, any proposed regulation should go through a comprehensive consultation and review process. Only in this way can we establish a reasonable, meaningful and targeted regulatory system and maintain the transparency of today’s US law enforcement agencies.
Read It’s full here.
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