Blockchain-based systems hold enormous promise to deliver innovative products and services to the global financial system, including for those who have historically existed outside it or at its margins. Achieving this promise requires, among other things, a set of well-reasoned regulations that reflect the complexity of this evolving technology.
Instead, the Treasury Department’s FinCEN proposed a rushed, non-vetted rule under the cloak of the holidays that violates the government’s own established rulemaking procedures. The new rule, ostensibly aimed at fighting financial crime, would require various cryptocurrency entities to collect and report detailed personal identifiable information of their customers’ counterparties, a standard applied to no other sector of the financial industry today. Such an ill-advised regulation will have many foreseeable and unintended negative consequences.
Instead of proposing a regulation that is based on reliable facts and evidence of regulatory need, that recognizes the difficult tradeoffs in regulating crypto activities, and that embraces the benefits of crypto to actually assist in the fight against financial crime, FinCEN has proposed at the eleventh hour of an outgoing administration a rule that has all the hallmarks of an arbitrary and capricious agency action. It fails to solve the challenges it purports to address, violates the Fourth Amendment by expanding the reach of the Bank Secrecy Act, sweeps in commercial activity beyond its stated focus of self-hosted wallets, and is drafted in such a way as to guarantee uneven application. All of this without even acknowledging all the negative impacts and while bypassing the standard rulemaking processes.
For these reasons, today we filed this response urging FinCEN to withdraw its proposed rule or at a minimum extend the comment period so that it can engage in a meaningful consultation with the crypto industry about topics that are important to the future of the U.S. economy.
Listen to a16z General Partner Katie Haun and Operating Partner Anthony Albanese discussing the FinCEN proposal on the 16 Minutes podcast:
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