New Rule Proposed To Monitor Self-Hosted Wallets’ Crypto Flows

Today, the US Treasury has finally released its proposal, long since anticipated, to start restricting the money services businesses from doing business with self-hosted wallets. This, unfortunately, extends to self-hosted wallets as well.

New Rule Mandates Unhosted Wallet Reporting

The announcement itself was made on Friday evening, with the Financial Crimes Enforcement Network, or FinCEN, announcing the proposed rules. These rules would see crypto exchanges be mandated to verify their customers’ identities, should a counterparty opt to make use of a covered or unhosted wallet to make a transaction of over $3,000.

As it stands now, the rule is all but a proposal, but the Treasury has given 15 days to stakeholders to respond to the proposal with their various comments.

Already Seeing Pushback

This proposed rule has had rumours of it circulate the crypto space for a month now. Steven Mnuchin, the Treasury Secretary, is being seen as doing this as a final insult to the crypto space before the new Biden administration comes in.

In the official announcement, Mnuchin described this rule as addressing substantial concerns regarding national security within the CVC market. According to Mnuchin, this rule is dedicated to closing the gaps malign actors want to exploit within the country’s reporting and recordkeeping legislation.

It wasn’t long before the proposed role saw substantial resistance, with a number of leading lawmakers already in opposition against it. Many of these lawmakers deem this new rule as an assault on the very nature of peer-to-peer transactions. The real issue comes from the absence of a formal law, allowing the Treasury to hold a considerable amount of rulemaking power within this field.

Limit Set At Travel Rule’s $3,000

It should be noted, however, that the proposal pushed forward isn’t as radical as some of the more paranoid elements of the crypto space had feared. Instead of putting in something even more draconian, the transaction threshold for reporting has been set at $3,000, which is in tandem with the existing requirements of the Travel Rule.

It should be noted that the minimum reporting threshold for transactions between registered entities are over three times higher, with reporting only needing to be done with transactions of more than $10,000.

Time will tell how this will play out, and whether or not the Treasury will manage to push this rule out before Mnuchin has to step down. Either way, it’s a step towards better regulations for the crypto space, though some people will gripe about it, as is the case with any meaningful regulation within the crypto space.