Imagine a world where you can send and receive cryptocurrency without a care in the world for your anonymity.
Sure, you’ll tell me that it already exists in the realm of cryptocurrency.
And you might like that, I might like it, but the authorities do not. So, they’re now trying to regulate crypto payments and tie personal details to them.
Let’s see what the legislative future might have in store for cryptocurrency users.
The US is targeting cryptocurrencies for more financial surveillance
The Department of the Treasury’s Financial Crimes Enforcement Network, FinCEN, for short, announced a proposed regulation that would require money service businesses to collect personally identifiable data about people who make transactions using self-hosted cryptocurrency wallets or foreign exchanges.
Under the new know-your-customer regulation, exchange services, including cryptocurrency ones, would need to collect data on transactions in total of $10,000 or over and send it to the government, much like banks do.
If this proposed bill passes, your withdrawals to your non-KYC'd address will take two transactions instead of one.— Eric Wall 🟨 (@ercwl) December 18, 2020
Before: Exchange -> Wallet Address
After: Exchange -> KYC Wallet Address -> Wallet Address
And the authorities seem to be in a rush too. They’ve left just a 15-day comment period for the proposal. Coinbase, one of the biggest cryptocurrency exchange companies, has asked for the usual 60-day review period.
FinCEN asked the public to provide comments in just 15 days, spanning Christmas Eve, Christmas Day, New Year’s Eve, and New Year’s Day, in the middle of a global pandemic — leaving just a handful of actual working days for comments. Because we have historically enjoyed and valued a productive working relationship with FinCEN, this recent development is an unfortunate and disappointing departure. Put another way, this latest NPRM is not how effective regulation is made. We therefore ask that FinCEN reconsider its haste and provide the typical 60-day period for such significant proposed rulemaking.Paul Grewal, Chief Legal Counsel, Coinbase
But here’s the thing.
Learn more about how cryptocurrencies operate.
The proposal would strip away cryptocurrency of what made it appealing and convenient.
Born in 2009 from libertarian dreams, cryptocurrency defined itself as a new way of making private transactions using a system that didn’t rely on trust. People saw it as a decentralized and anonymous alternative to banks.
But that might all be about to change.
The main concerns with the proposed legislation
As you might expect, the proposed regulations affect cryptocurrency transfers and impact their whole ecosystem.
Private wallets would have their capabilities limited
The regulation would change how people who store cryptocurrency in their wallets can effectively transfer money.
Individuals with private wallets will be unable to transact anonymously with others who store their cryptocurrency with a money service business.
This might also restrict areas of e-commerce.
Names would be associated with transactions
For some cryptocurrencies like Bitcoin, transaction data is permanently recorded on a public blockchain. This data includes users’ Bitcoin addresses.
Under the new regulations, you can effectively trace all their transactions if you know someone’s particular Bitcoin address.
Not exactly a privacy haven, right?
Self-hosted wallets would become obsolete
The new US regulations could make it increasingly difficult for self-hosted wallet users to interact with others.
Self-hosted wallets wouldn’t be able to send or receive funds to and from wallets handled by a professional service.
It would increase surveillance
Financial regulators, much like the NSA, seem to operate under the assumption that anyone interested in protecting their privacy must be hiding something illegal or nefarious.
But this is a flawed assumption that private transactions are indicative of criminal activity.
The framework also says that people operating mixers and tumblers can be criminally liable for money laundering because they make cryptocurrency transactions harder to trace.
The US isn’t the only one itching to regulate cryptocurrency.
Christine Lagarde, European Central Bank’s President, recently stated that Bitcoin has facilitated “funny business” and needs to be regulated at the international level.
Moreover, John Glen, the Economic Secretary to the UK Treasury, has also asked for cryptocurrency companies to provide insights into their regulatory approach following the Brexit turmoil.
So, it’s safe to say the cryptocurrency industry has quite a few challenges ahead.
But what do you think about this proposal? Should there be more regulation around crypto? Or should it be the decentralized and anonymous industry it aims to be?
Let me know in the comments below.
Until next time, stay safe and secure!