Yesterday, December 17, 2020, the U.S. Treasury has proposed a rule which would require more intense identification of those transacting in digital coins such as Bitcoin with U.S. financial institutions. Today, tracing Bitcoin transactions is much easier than cash transactions, which has people wondering why the Trump administration is proposing such a rule when Trump is on his way out the door. Under the Notice of Proposed Rulemaking (NPRM) submitted to the Federal Register yesterday, banks and money services businesses (MSBs) would be required to submit reports, keep records, and verify the identity of customers in relation to transactions above certain thresholds involving CVC/LTDA wallets not hosted by a financial institution (also known as “unhosted wallets”) or CVC/LTDA wallets hosted by a financial institution in certain jurisdictions identified by FinCEN.
Apparently, no one told the U.S. Treasury that a global ledger of blockchain transactions already exists and their proposed rule is unwelcome in Bitcoin circles. Treasury Secretary Steven T. Mnuchin stated, “This rule addresses substantial national security concerns in the CVC market, and aims to close the gaps that malign actors seek to exploit in the record-keeping and reporting regime. The rule, which applies to financial institutions and is consistent with existing requirements, is intended to protect national security, assist law enforcement, and increase transparency while minimizing impact on responsible innovation.”
Mnuchin failed to address specifically how national security is being harmed without the extra regulation. Apparently, the federal government is not happy unless they know every transaction every American is making.
If they implement the rule, it would require those wishing to purchase or sell their digital currency to provide the following to the financial institution in a transaction, assuming a financial institution is involved:
- The name and address of the financial institution’s customer;
- The type of CVC or LTDA used in the transaction;
- The amount of CVC or LTDA in the transaction;
- The time of the transaction;
- The assessed value of the transaction, in U.S. Dollars, based on the prevailing exchange rate at the time of the transaction;
- Any payment instructions received from the financial institution’s customer;
- The name and physical address of each counterparty to the transaction of the financial institution’s customer;
- Other counterparty information the Secretary may prescribe as mandatory on the reporting form for transactions subject to reporting pursuant to § 1010.316(b);
- Any other information that uniquely identifies the transaction, the accounts, and, to the extent reasonably available, the parties involved; and,
- Any form relating to the transaction that is completed or signed by the financial institution’s customer.