FinCEN Withdraws $10,000 Bitcoin (BTC) Wallet Reporting Proposal
Key Takeaways
- •FinCEN filed withdrawal notices on Monday, formally ending the rulemaking that began with its December 2020 proposal on self-custodied crypto wallet transactions.
- •The withdrawn proposal would have required banks and money services businesses to report transactions over $10,000 involving self-custodied wallets and verify counterparty identities for transactions above $3,000.
- •The measure, issued in the final weeks of then-Treasury Secretary Steven Mnuchin's tenure, faced criticism from cryptocurrency industry groups and privacy advocates, partly over an initial 15-day comment period that was later extended to March 29, 2021.
- •The proposed reporting and recordkeeping requirements never took effect because the rule was never finalized.
- •Following the withdrawal, banks and money services businesses will not face new obligations for self-custodied wallet transactions, leaving their requirements unchanged from before the proposal.
The Financial Crimes Enforcement Network (FinCEN), the US Treasury's anti-money-laundering bureau, on Monday withdrew its December 2020 proposal that would have forced banks and money services businesses to surveil transactions with self-custodied crypto wallets. Both withdrawal notices were filed.
Background on the Proposal
The proposal, issued in December 2020 during the final weeks of then-Treasury Secretary Steven Mnuchin's tenure, would have required banks and money services businesses (MSBs) to file reports with FinCEN for transactions exceeding $10,000 that involved self-custodied — also known as self-hosted — crypto wallets, meaning wallets whose private keys are controlled directly by users rather than by an exchange or other intermediary. Covered institutions would also have been required to verify and record the identities of counterparties for transactions above $3,000.
The measure drew immediate criticism from cryptocurrency industry groups and privacy advocates, in part because FinCEN allowed an initial public comment period of just 15 days, with comments due by January 4, 2021. The bureau later extended the comment deadline to March 29, 2021, but the rule was never finalized, meaning the proposed reporting and recordkeeping requirements never took effect.
Context
Self-custodied wallets have been a recurring point of debate in US anti-money-laundering policy, as they allow users to hold Bitcoin (BTC) and other digital assets without routing transactions through regulated intermediaries. With the withdrawal notices filed on Monday, FinCEN formally closed out the rulemaking that began with the December 2020 proposal. For banks and MSBs, the withdrawal means the $10,000 reporting threshold and the $3,000 counterparty verification requirement will not be added to their obligations through this rulemaking, leaving their requirements for transactions involving self-custodied wallets as they stood before the proposal was issued.
This content was first published on COINOTAG: https://en.coinotag.com/fincen-withdraws-bitcoin-wallet-reporting-proposal
