US Treasury to revisit proposal for verifying users of non-custodial cryptocurrency wallets

In 2022, the U.S. Department of the Treasury will revisit the controversial FinCEN proposal, which envisages mandatory verification of users of non-custodial cryptocurrency wallets. states in the agency’s semiannual agenda.

«FinCEN proposes to amend the rules implementing the Bank Secrecy Act (BSA) to require banks and money services to file reports, maintain records, and verify customers’ identities in transactions involving convertible virtual currency (CVC) or digital assets with the status of legal tender, stored in non-custodial wallets or wallets hosted in a FinCEN-determined jurisdiction», states on the Federal Register site.

The agency first proposed the measure at the end of 2020. The document was prepared by Steven Mnuchin, who at the time was the U.S. Treasury Secretary.

The community members criticized the initiative, arguing that a number of digital wallets technically cannot meet KYC requirements. Some also noted that the rule would be burdensome for individuals.

According to the timetable, FinCEN plans to finish work on the rule by August, but publication does not guarantee that it will not undergo changes in the process.

If the proposal is adopted in its initial form, cryptocurrency exchanges will be required to collect names, addresses and other personal data of users transferring digital assets to non-custodial wallets.

ZenGo CEO Ouriel Ohayon again noted that FinCEN’s requirements are infeasible.

If they understood how wallets work they would know the notion of user account doesn’t exist and therefore KYC can’t be done in a systemic way unless you re engineer completely wallets. https://t.co/9kx6dQjl0b

— OOeb3 (@OurielOhayon) January 30, 2022

«If they understood how wallets work, they would know that the notion of a “user account” does not exist, and therefore KYC cannot be performed in a systemic way», — he wrote.

FinCEN also plans to “clarify the term “money”” within the BSA as applied to digital assets. The agency argues that transactions with them should be regulated under the same rules as fiat currencies.

«According to the agency’s plan, the revised proposal would extend the application of the rules to domestic and cross-border transactions involving convertible virtual currency that serves as a medium of exchange (for example, cryptocurrency), has an equivalent value as currency, or acts as a substitute for currency, but does not have legal tender status», the publication states.

As noted in November 2021, U.S. Treasury Secretary Janet Yellen said that the FATF rules are aligned with FinCEN’s standards for cryptocurrency regulation.

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