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FinCEN introduces new KYC rules for crypto wallets

FinCEN introduces new KYC rules for crypto wallets

The U.S. FinCEN has issued a proposed rule for enhancing the regulations relating to crypto wallets. The rule would introduce record keeping and reporting obligations for businesses by bank or money serving institutions. It includes an unhosted or otherwise concealed wallet. FinCEN (Financial Crimes Enforcement Network ) describes “unhosted wallets” as a software program or a written record. Through it, the users save their private keys to obtain and trade crypto, such as bitcoin. 

FinCEN’s proposed rule to intensify AML standards

FinCEN’s proposed rule would require bitcoin exchanges to gather, store, and share personal data of users who send their bitcoin from those exchanges to their own private wallets and transaction information. If passed, the proposed rule, called “Requirements for Certain Transactions Involving Convertible Virtual Currency or Digital Assets,” would reduce self-hosted wallets to increase anti-money laundering standards. This indicates that anonymous transactions would occur in the past.

However, the rule beckons improved (KYC) know-your-customer requirements for withdrawals greater than $3,000. Further, for transactions greater than $10,000, firms would have to report to FinCEN. It would expect banks and MSBs to record data concerning a consumer’s transaction and their counterparty. It includes names and physical addresses to confirm both parties’ integrity. 

 FinCEN is also issuing rules encompassing “structuring,” which involves splitting bigger transactions into smaller ones for reporting obligations. The recently introduced rule is in line with the Financial Action Task Force’s Travel Rule. It calls for selling venues to offer exchange originator and beneficiary identity data for exchange-to-exchange transactions larger than $10,000. U.S. exchanges have constantly been working to satisfy the intricacies offered by the rule. Further, till Jan 4, 2021, the public has to present written comments to this rule. It can be submitted via the online federal rulemaking portal.

However, such rulemaking has been rumored for a while now. For example, Brian Armstrong, the CEO of significant cryptocurrency exchange Coinbase, tweeted about its potential late November. Some expressed apprehensiveness that the rulemaking would be more stringent than what seems in the stated rule. However, FinCEN believes that the requirement to propose such regulation symbolizes recognizing the expanding significance and adoption of cryptocurrency.

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