FinCEN proposes new KYC rules for crypto wallets

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 transactions sent to self-hosted wallets and wallets held at financial institutions not subject to U.S. anti-money laundering (AML) law to heightened AML standards.

The rule calls for enhanced know-your-customer (KYC) requirements for withdrawals to unhosted wallets 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 names and physical addresses to verify both parties' identities. 


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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 newly proposed rule is similar in spirit to the Financial Action Task Force's Travel Rule, which calls for trading venues to share exchange originator and beneficiary identity information for exchange-to-exchange transactions greater than $1,000. U.S. exchanges have been working to meet the challenges presented by the rule.

The Block reported Thursday night that Treasury was considering a new rule aimed at self-hosted wallets.

The proposal is slated to hit the register on Dec. 23. There will be a 15-day public comment period.

About Author

Aislinn Keely is a reporter on The Block's policy team holding down the legal beat. She covers court decisions, bankruptcies, regulatory actions and other key moments in the legal sphere, putting them in context for the wider crypto industry. Before The Block, she lent her voice to the NPR affiliate WFUV and helmed Fordham University's student newspaper. Send tips or thoughts on all things policy and legal to [email protected] or follow her on Twitter for updates @AislinnKeely.