The Electronic Frontier Foundation (EFF) expressed concern about strengthening financial supervision through the proposed crypto regulations announced by the Financial Crimes Enforcement Network (FinCEN) of the United States Treasury Department.
The nonprofit is concerned about new rules for self-hosted crypto wallets, proposed by FinCEN
According to the non-profit organisation based in the United States, FinCEN seeks to undermine “one of the most important aspects of cryptocurrencies from a civil liberties point of view,” which can ensure privacy protections for their users.
The financial supervision of the traditional banking system could be imported into cryptocurrencies just like that by heavily overseeing crypto transactions on exchanges, the EFF said.
On December 18, 2020, the Bureau of the United States Treasury suggested new rules “aimed at closing gaps in money laundering regulations for certain convertible virtual currencies [CVC] and digital asset transactions ” amid rumors that Treasury Secretary Steven Mnuchin was rushing rules for self-hosted crypto wallets before Biden took office as president of the United States.
The nonprofit makes it clear that while they are still reviewing FinCEN’s full proposal, they noted:
The regulation is likely to hold back the ability to use self-hosted wallets to transact with the privacy of cash. (…) The proposed regulation’s requirement that money service companies collect identifying information associated with wallet addresses means that the government may have access to a vast amount of data beyond what the regulation claims to cover.
The EFF also believes that new rules could hinder “ wider adoption ” of self-hosted crypto wallets among technologies that rely on them, as it could make it significantly more difficult for users to communicate seamlessly with other users who have wallets provided by a service subject to regulation. “
Adopting FinCEN’s proposed rules is premature: Bitcoin-Friendly Senator
In addition, there are concerns from the nonprofit about the requirement of hosted wallet services to collect certain information about self-hosted wallet users “who transact with their customers in certain circumstances.” The EFF adds:
While the proposed rules simply claim to apply pre-existing regulations regarding cash transactions to cryptocurrencies, they ignore that these digital financial instruments exist in part to provide financial privacy and anonymity similar to, and perhaps higher than, traditional cash. In this regard, the proposed regulations are part of a larger worrying trend by the US government to extend financial oversight of the traditional banking system to cryptocurrencies.
Cynthia Lummis, a Republican lawmaker and bitcoin-friendly senator-elect for Wyoming, too expressed are concerned about the Treasury Department’s new ground rules for self-hosted digital asset portfolios:
Rather than prematurely passing a rule on this complex subject, the Treasury should immediately begin a transparent process of liaising with Congress and industry to reach consensus to move America forward.
What do you think of the nonprofit’s opinion? Let us know in the comments below.
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