The U.S. Financial Crimes Enforcement Network (FinCEN) has released a proposed rule that would instill record keeping and reporting requirements for transactions by or to a bank or money service business involving an “unhosted or otherwise covered wallet.”
If enacted, the proposed rule, entitled “Requirements for Certain Transactions Involving Convertible Virtual Currency or Digital Assets,” would subject self-hosted wallets to heightened anti-money laundering standards, meaning anonymous transacting could become a thing of the past.
FinCEN proposes to define those wallets as “those wallets that are held at a financial institution that is not subject to the Bank Secrecy Act and is located in a foreign jurisdiction identified by FinCEN.”
The rule calls for enhanced know-your-customer (KYC) requirements for withdrawals greater than $3,000. For transactions larger than $10,000, firms would have to report to FinCEN. It would require banks and MSBs to file information pertaining to a customer’s transaction and their counterparty, including name and physical address to verify both parties’ identities.
To ensure no one is transacting anonymously, FinCEN is also proposing rules around “structuring,” which entails breaking large transactions into smaller ones in order to get around reporting requirements.
The proposal is in line with the Financial Action Task Force’s Travel Rule, which calls for exchanges to heighten KYC requirements and exchange originator and beneficiary identity information to curb money laundering and other nefarious activities. U.S. exchanges have been working to meet the challenges presented by the rule.
The proposal is slated to hit the register on Dec. 23. The Block first reported the coming action last night.
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