A Jan 4 comment letter from Jack Dorsey, the CEO of Square Inc., raised concerns over the proposed crypto wallet rule by the Financial Crimes Enforcement Network (FinCEN).
Dorsey argued that mandating crypto service providers to keep records of transactions and report certain info to financial watchdogs goes far beyond what is required for cash transactions today.
Though meant to curb some of the illegal uses of cryptocurrencies, such monitoring will only create “unnecessary friction” between digital asset users and financial institutions.
Jack Dorsey also expressed concerns that forcing exchanges to collect the personal info of both parties of large crypto transactions is an overreach, especially given the open nature of the blockchain.
He explained that the rule would only add to regulatory hurdles for crypto transacting, thus stifling innovation in the nascent sector and driving crypto users offshore.
“By adding hurdles that push more transactions away from regulated entities like Square into non-custodial wallets and foreign jurisdictions, FinCEN will actually have less visibility into the universe of cryptocurrency transactions than it has today,” an excerpt from the letter asserted.
FinCEN Rule Receives Widespread Criticism
Top financial services platform Square Inc. has joined a growing number of U.S. crypto firms united in opposition to new laws proposed by FinCEN.
The main argument against heightened identification requirements for crypto transactions is that they will only push more folks to use services outside the U.S. when transferring their digital assets. Exchanges also lament that they lack the tools required to comply with the wallet rule’s reporting directives.
Per Square’s statement, the FinCEN proposal will compromise user privacy and thus stifle the widespread adoption of crypto, impacting the U.S.’s global competitiveness in the digital assets sector.
U.S.-based exchange Kraken had earlier slammed the FinCEN rule, dubbing it a proposal a politically-motivated piece of midnight rulemaking that will drive users away from regulated platforms.
More recently, on Jan 5, Brian Armstrong, the CEO of Coinbase, once again took to Twitter to bash the FinCEN rule on unhosted crypto wallets. The outspoken CEO reiterated that the proposed regulation is ill-advised and does not “follow proper procedures.”
U.S. Lawmakers Back Crypto Industry’s Request
As we had previously reported, many stakeholders in the crypto industry have called on FinCEN to extend the scheduled feedback deadline from 15 days to 60 days.
The 15-day feedback time to comment on the proposed regulation, which expired on Jan 4, 2021, has generated a fuss within the industry.
Many prominent figures such as Coinbase CEO Brian Armstrong have protested that the crypto industry’s response time was too short, mainly because FinCEN released the proposal during the holidays.
And now, the call for a deadline extension has finally gained support from some members of the U.S. Congress. In a recent official letter addressed to Treasury Secretary of State Steve Mnuchin, a group of U.S. lawmakers led by Rep. Tom Emmer urged FinCEN to consider extending the review period to 60 days.
According to the congressmen, this extension is necessary to allow all stakeholders to evaluate how the proposed rule will impact their operations and customers.