FinCEN Proposes KYC For Withdrawing Cryptocurrency To Private Wallets

The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has released a notice of proposed rulemaking that would require money services business to submit reports, keep records and verify the identity of customers as they relate to digital currencies “held in unhosted wallets … or held in wallets hosted in a jurisdiction identified by FinCEN.”

FinCEN defined “unhosted wallets” as a “software program or written record” through which users store the private keys needed to access and exchange cryptocurrencies like bitcoin. 

The proposed rule would, in effect, require bitcoin exchanges to collect, store and share personal information from users who transfer their bitcoin private keys from those exchanges to their own private wallets, as well as transaction information. 

The public has until January 4, 2021 to provide written comments to this rule, which can be submitted through the online federal rulemaking portal.

Such rulemaking has been rumored for some time. For instance, Brian Armstrong, the CEO of major cryptocurrency exchange Coinbase, tweeting about its potential in late November.

Some feared that the rulemaking would be more strict than what appears in the proposed rule. Though it violates a bastion of privacy that many within the Bitcoin community cherish, the fact that FinCEN feels the need to propose such regulation indicates a realization of the growing importance and adoption of cryptocurrency.

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