What Would FinCen Crypto Rules Mean For You?

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  • New rules from FinCen over the regulation of cryptocurrencies were propose last week
  • The new FinCen crypto rules would see vastly increased monitoring of cryptocurrency transactions
  • How would the new FinCen crypto rules affect you?

Last week the U.S. Treasury followed through with plans to increase regulation of the cryptocurrency industry as it announced a range of potential measures to close loopholes. Through the Financial Crimes Enforcement Network (FinCen), the U.S. government is aiming to obtain more information about who is conducting large crypto transfers as they try to weed out bad actors using cryptocurrency for illegal practices. But how would such changes, if enacted, affect the average user?

Crypto Brought Into Line With Traditional Markets

First the good news. It was feared that the new FinCen crypto rules would impart tough new regulations at a peer-to-peer level, but in fact the changes merely bring cryptocurrency transactions into line with existing financial regulations, most notably those drawn up by the Financial Action Task Force (FATF) in June last year.

If you are a small-scale crypto trader/holder who tends to keep their crypto on a single crypto exchange, the chances are you won’t be affected, at least for now. The proposed rule changes only really impact those who transfer crypto on a regular basis or engage in larger irregular transfers.

If the proposed FinCen crypto rules are enacted, anyone who transfers in/out more than $10,000 worth of cryptocurrency will see certain details of the transaction recorded and sent to FinCen. This is a threshold that has existed for personal transfers for many years and was created to “safeguard the financial industry from threats posed by money laundering and other financial crime”.

Breaking these transactions down into smaller ones is called “structuring” and constitutes a contravention of federal law. There’s no suggestion that FinCen will take any action against you due to your $10,000+ crypto move, but if for some reason they consider you a bad actor then you could find yourself in hot water.

Smaller Transactions Also Monitored

It isn’t just $10,000+ transfers that would be subject to the new FinCen crypto laws. All transactions over the value of $5,000 that involve an exchange or other money transmitting service would see a raft of data being taken:

  • The name and address of the financial institution’s customer;
  • The type of convertible virtual currency or legal tender digital assets used in the transaction;
  • The amount of convertible virtual currency or legal tender digital assets in the transaction
  • The time of the transaction
  • The assessed value of the transaction, in dollars, based on the prevailing exchange rate at the time of the transaction
  • Any payment instructions received from the financial institution’s customer
  • The name and physical address of each counterparty to the transaction of the financial institution’s customer, as well as other counterparty information the Secretary may prescribe as mandatory on the reporting form for transactions
  • Any other information that uniquely identifies the transaction, the accounts, and, to the extent reasonably available, the parties involved; and
    Any form relating to the transaction that is completed or signed by the financial institution’s customer.
  • Before concluding any transaction in relation to which records must be retained under this paragraph, a financial institution shall verify the identity of its customer engaging in the transaction

As a user, you are not required to take any action – all the onus is on the exchange or money transmitter you used. Peer-to-peer transfers will not be subject to the same rules, so there is no need to record details of wallet-wallet transactions.

FinCen Crypto Rules Not Yet Approved

It must be noted that these are proposed changes and, while they are extremely likely to be approved in the new year, they could be subject to amendments before becoming law. FullyCrypto will keep you up to date on any such changes and formal ratification of these proposed FinCen crypto laws.