American crypto exchanges have begun a fightback against new Treasury-backed proposals that would seek to force trading platforms in the nation to report certain transactions to a state-appointed monitor.
The plans in question were revealed on Friday and were met with an immediate backlash from industry organizations such as the Blockchain Association. They appear to have been in the pipelines for a number of weeks, and were seemingly leaked to the press in considerable detail last week prior to their official unveiling on Friday.
The Treasury is keen to apply the same kind of Financial Crimes Enforcement Network (FinCEN) regulations that it currently requires conventional financial institutions to follow: namely to report all transactions above a certain monetary worth.
The proposals are currently in a 15-day consultation phase, but heavy-hitting exchanges are already making their feelings public – and are not holding their punches.
Kraken has issued the Treasury a warning, with its Chief Legal Officer Marco Santori taking to Twitter to explain that the proposals go far beyond simply forcing platforms to file currency transaction reports (CTRs).
He said that the Treasury is instead proposing a “rule that requires [crypto company] customers to report the name and mailing address of any recipient of virtual currency. If the customer can’t provide one – or if the recipient doesn’t have one – the [company] must terminate the transaction.”
And Santori added,
“The consequence of this rule is clear: Rich people can’t send money to poor people. The rule would ALSO prohibit sending virtual currency to smart contracts that are specifically designed to eliminate the middlemen who keep the poor out of our financial system.”
And the lawyer went a step further, accusing the government agency of underhand tactics,
“Perhaps in recognition of this, FinCEN is attempting to sneak this proposed rule into law over the holiday season – hoping nobody will notice – and even if we did, giving us only 15 days to respond. Kraken is going to oppose this. You should, too.”
In a blog post, the exchange added that the move “seeks to wall off tomorrow’s financial system from the poor.”
Meanwhile, rival exchange Coinbase took a slightly different tack, instead requesting more time to prepare a response to the Treasury.
Paul Grewal, Coinbase’s own legal chief, also took to Twitter to complain,
“FinCEN asked for comments in just 15 days, spanning Christmas Eve and New Year’s Day, in the middle of a pandemic – leaving few actual working days for comments.”
The legal expert stated that this would not provide Coinbase or its rivals with enough time to prepare a considered reply to the “24 separate questions” put forward in the proposal.
“This is not how effective regulation is made. We ask that FinCEN reconsider its haste and provide the typical 60-day period for such significant proposed rulemaking – nothing more, but nothing less.”