FinCEN tightens its thumbscrews on regulation
As the year kicks off, there are indications that the regulatory regime for the crypto market will be drastically tightened. Especially in the US. FinCEN is presenting two initiatives at once.
With the Financial Crimes Enforcement Network (FinCEN), the US Treasury Department has a department that specialises in Bitcoin Legacy review monitoring potential violations of domestic financial laws. Now they are planning a new regulation. US citizens will have to report it if they have more than 10,000 US dollars (USD) in cryptocurrencies with foreign financial service providers or providers of virtual assets.
As stated in a FinCEN memo, currently the Foreign Bank and Financial Account Reporting (FBAR) regulations do not define a foreign virtual currency account as a type of reportable account. This is only the case if the account holds reportable assets in addition to virtual currencies. Currently, FBARs must be filed by persons who have a total of more than USD 10,000 in foreign financial accounts, including foreign currencies in the form of fiat money. Virtual currencies are currently excluded from this reporting requirement.
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FinCEN’s plans for the changed rulemaking were made public on New Year’s Eve. This may not have happened by accident. It is commonly expected that there will be a change at the top of the Treasury Department in about three weeks. Nevertheless, the announcement does not contain an exact date of entry into force of the new regulation.
Crypto scene not very enthusiastic about FinCEN proposal
The FBARs must include the name of the account holder, the account number, the name and address of the foreign bank. The type of account and the maximum value that appeared there during the year are also required. People who do not file the tax return face various penalties. These include fines, according to the International Revenue Service (IRS) website. Whether FinCEN will also require crypto investors to provide additional information, such as blockchain addresses, is currently unclear.
In addition, FinCEN wants to implement another regulatory provision. This is about a requirement for crypto exchanges to store customer data when more than USD 3,000 is transferred to unhosted wallets. This announcement a week before Christmas was anything but well received in the crypto scene. Its enforcement would mean an immense additional administrative burden for many crypto projects, especially smaller ones. Many active members of the crypto community have therefore called on their users to submit comments against this proposal. Some observers see this push as a kind of parting shot against cryptocurrencies by current Treasury Secretary Steven Mnuchin. The cry for help from Brian Armstrong, founder and CEO of the bitcoin exchange Coinbase, was particularly loud.