On December 23, 2020, FinCEN issued a notice of proposed rulemaking concerning Virtual Asset Service Providers(VASPs) which currently includes bitcoin exchanges, custodial wallets, etc. It's important to note that the normal comment period is 30 to 60 days, in which the public is invited to comment on these rules, which will directly effect them. In this instance, the US Treasury is only affording the public a 15-day comment period which spans the Christmas and New Years Holidays, which is an ugly 11th hour attempt to regulate an industry in the absence of collaboration & input from the people and companies who will be impacted the most. It is uniformed and rushed at best, intentional and illegal at worst.
In short, the only thing this new proposed rule will accomplish is to further erode the constitutional rights of the average American, while doing nothing to actually accomplish its stated goal. My full comment is below:
January 2, 2021
To whom it may concern:
My name is Jeff Kern, and I have worked as a compliance officer in the cryptocurrency space since 2013, almost as long as there have been licensed VASPs in the USA. Most recently I served as Chief Compliance Officer at bitFlyer USA, a bitcoin and other CVC asset exchange. I currently advise MSBs on how they can become and remain compliant with the ever-increasing requirements of the Bank Secrecy Act. I make the following comment as someone who operationalizes BSA requirements every day.
My first concern with the new requirements is the reduced 15-day comment period the Treasury Department is affording the public to comment on. Not only is the comment period cut in half from the normal 30 days, but the proposal was made on December 23, which coincidentally covers both the Christmas and New Year's holidays, while the country is struggling with a national health crisis in the form of Covid. I cannot conceive of a reasonable reason for these restrictions, especially considering the complex nature and importance of the technology in question.
My second, and primary, concern with the new requirements is the increased eroding of the financial privacy of the American people. Given the above-mentioned time constraints, I will limit my comment to the proposed rule to record the name and address of "counterparties'' to financial institution customers for transactions over $3,000. This proposed obligation forces MSBs to collect even more information on their customers than they already do, which is already significant, and the newly collected information will not accomplish the stated goals of preventing money laundering and/or the financing of terrorism. This rule only adds a small hurdle to bad actors, at a hugely disproportionate cost to the average customer, who by an incredibly large percentage do not launder money, finance terrorism, or commit other financial crimes this rule is intended to prevent.
Law enforcement agencies will not have any new information to bring criminals to justice. Instead they will have more of the same personally identifiable information to wade through, which will actually hinder their ability to do their jobs. Investigators in the compliance departments of MSBs will not have any new information to help identify and report suspicious activity. Instead the cost of compliance for operating a legal business in the United States will increase, again in a hugely disproportionate manner to the effectiveness of the new rules. This will hinder small business and innovation in this space, which is critical to keep the United States a global financial leader. Ultimately the majority of new business will move outside of the United States, which is a national security issue of a much higher priority.
I urge you to remove the requirement that counterparty information be recorded. The primary effect of this rule will be to require businesses to collect and transmit an unacceptable amount of American's personally identifiable information, putting them at risk of identity theft through data breaches similar to the one recently suffered by FinCEN and the Treasury Department, without any noticeable increase to the stability of the financial infrastructure of the United States.