The Financial Crimes Enforcement Network (FinCEN) of the United States Treasury Department has a notification of proposed regulations for which money service companies must submit reports, maintain records and verify customer identities with respect to digital currencies ‘in non-hosted wallets … or in wallets hosted in a jurisdiction specified by FinCEN’.
FinCEN defined “non-hosted wallets” as a “software program or written record” that allows users to store the private keys necessary to access and exchange cryptocurrencies such as bitcoin.
In effect, the proposed rule would require bitcoin exchanges to collect, store and share personal information from users who transfer their private bitcoin keys from those exchanges to their own private wallets, as well as transaction information.
The public has until January 4, 2021 to comment in writing on this rule, which can be submitted through the online federal regulatory portal.
There have been rumors about such regulations for quite some time. For instance, Brian Armstrong, the CEO of major cryptocurrency exchange Coinbase, tweeted about its potential in late November.
Some feared that the regulations would be more stringent than what is in the proposed rule. While it violates a bastion of privacy cherished by many within the Bitcoin community, the fact that FinCEN feels the need to propose such regulation indicates a realization of the growing importance and adoption of cryptocurrency.