LexDAO Comments on FinCen Proposed Rule for Unhosted Wallets
LexDAO members highlight concerns on the FinCen Proposed Rule process, substance and impact on U.S. consumers.
On December 18, the Financial Crimes Enforcement Network (FinCEN) submitted a notice of proposed rulemaking (NPRM) covering new recordkeeping requirements for exchanges and other similar providers that facilitate transfers from “hosted” or custodial wallets (such as those familiar on Coinbase), and “unhosted” wallets, which are really just “wallets” in the ordinary understanding of most crypto users.
LexDAO and its members have submitted a comment highlighting certain issues over the process of making the NPRM, its uncommon definitions describing regulated assets, as well as the way it creates special and counter-intuitive requirements for crypto custodians.
The comment has been uploaded to IPFS and hashed into an Ethereum smart contract for our own recordkeeping purposes ;0). Scope working draft among LexDAO.
To preview the comment (linked below), LexDAO suggests the following:
(1) NPRM and similar ‘comment’ materials should adopt commonly-used terms from the crypto industry:
SUGGESTIONS
“anonymity-enhanced cryptocurrency” => “privacy currency”
“convertible virtual currency” => “digital currency”
“legal tender digital assets” => “central bank digital currency”
“hosted wallet” => “custodial wallet”
“unhosted wallet” => “digital wallet” or simply “wallet”
(2) NPRM should extend to 60 days, as recommended by members of Congress. The rushed notice-and-comment period here appears lackluster to complex effort of making constructive rules over digital wallets that don’t prejudice U.S. consumers against opportunities provided in other jurisdictions.
(3) NPRM should consider and elucidate cost to U.S. consumers of implementing special recordkeeping on crypto transfers. LexDAO joins the voices of other commenters like Coin Center to urge a more thorough consideration of how the proposed recordkeeping might needlessly complicate the experience of entering crypto markets. Imposing special data retention requirements for crypto versus ordinary cash transactions seems neither protective nor necessary at this juncture. The outsize benefits of seamless economic interactions at the speed of the internet deserve deep consideration before the U.S. government slows opportunities. In this respect, LexDAO joins the recommendations of Coin Center to not impose any additional recordkeeping requirements related to CVC payments over $3,000, and otherwise follow the ordinary CTR requirements for transactions over $10,000.
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