The US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has published a proposal to regulate cryptocurrency transactions made through users‘ own wallets.
They could begin to be subject to the same requirements that already apply to transactions made by users of exchanges and other cryptocurrency services.
If the proposal is adopted, withdrawals of cryptocurrency to their own wallets from a centralised exchange would require the identity of the recipient to be verified, and the exchange would be required to store this data.
FinCEN is proposing that increased identification requirements would apply to outgoing transactions of $3,000 or more. For transactions above $10,000, companies will have to notify the authority directly. The regulator intends to ensure that the rule cannot be circumvented by splitting the transaction into several smaller parts.
FinCEN intends to collect public comments by January 4, 2021.
According to renowned expert Andreas Antonopoulos, this 1k Daily Profit will hit exchanges and custodial wallets, which will have to do extra work and force users to perform more actions.
„You will have to prove that the address belongs to you in order to withdraw to it. This year it will be $3,000. Next year they will lower the bar, even with inflation. Over time, all transactions will be controlled. Not your keys – not your coins, extra barriers. Your keys are your coins,“ he wrote.
„It’s pretty silly, but devoid of meaning. It will give them a huge database of wallet owners without relying on Chainalysis data, which is always probabilistic. The government will now have a confirmed list of wallet owners,“ commented The Block analyst Larry Cermak on FinCEN’s initiative.
He called it an obvious attack on user privacy, but noted that the proposal is not compatible with DeFi services and other protocols that cannot be subjected to KYC procedures.
„I think users will withdraw cryptocurrency to an identified wallet and then spend it through Tornado Cash or another mixer until this is also banned,“ Cermak added.
Recall that the US authorities intend to take such a step and are preparing a „farewell gift“ to the crypto industry before Donald Trump leaves office as president, Coinbase CEO Brian Armstrong said in November.
He believes that if such a proposal is passed, users will start turning to unregulated platforms, and the situation itself threatens to cause the US to lose its financial centre status.
Last week, Circle CEO Jeremy Allaire said in a statement to the US Treasury that it would work with the blockchain industry to develop regulatory requirements.