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US regulators are debating the “why” of a new proposal that worries cryptocurrency fans.
Speaking on Monday at the V20 Virtual Asset Service Providers Summit, Carole House, an emerging technology and cyber policy specialist at the Financial Crimes Enforcement Network (FinCEN), said criminals are conducting cross-border payments using smaller amounts of cryptocurrency – hence the proposed lowering of FinCEN “Travel rule” threshold.
Under the rules change proposal submitted last month, FinCEN and the Federal Reserve would change the thresholds at which banks must collect and store information on fund transfers, reducing it from $ 3,000 to $ 250 for any transfer – in crypto or fiat. – that goes outside the United States
It’s part of an overall broadening of deadlines, House said, adding that lowering reporting thresholds for international transactions will help law enforcement and other national security authorities.
Read more: The United States moves to launch a wider network to catch money launderers, Crypto or otherwise
“Criminals are using smaller transfers of value and virtual currencies to facilitate the financing of terrorism, drug trafficking and other illicit activities, such as cybercrime,” House told V20 delegates. “We therefore strongly urge you to provide FinCEN with your feedback on the NPRM [Notice of Proposed Rulemaking] by November 27 “.
FATF luck
The Travel Rule aims to prevent money laundering by identifying the originator and beneficiary of a transaction when funds exceeding a certain amount are transferred. Applying this rule to the pseudonymous cryptocurrency architecture is a challenge faced by the Financial Action Task Force (FATF) in partnership with local regulators and the digital asset industry.
According to FinCEN’s analysis of 2,000 suspicious transaction reports (SARs) filed between 2016 and 2019, the average and median dollar value was $ 509 and $ 255 respectively. Almost all transactions started or ended outside of the United States
In response to the NPRM, the Washington, DC-based digital assets think tank Coin Center questioned the changes to the threshold for Travel Rule obligations in terms of the absence of adequate cost-benefit analysis. Such an analysis should consider not only the direct cost to regulated entities, but the cost to individuals and society, he said.
There has been considerable concern from small and medium-sized businesses about the cost of compliance in general, and particularly when it comes to things like Travel Rule, which emerged during the questions and answers about the V20.
Addressing the cost of compliance, FATF Executive Secretary David Lewis told V20 delegates the cost of not joining was far greater.
“If you want this industry to have a good reputation and continue to operate short, it is ultimately the central prerequisite,” Lewis said. “The cost of non-compliance will only have short-term benefits, one might say, and would be very shortsighted for companies that want to continue operating in this space and don’t want to give their industry a bad reputation.”
Lewis pointed out that in around 20 countries there are approximately 1,130 VASPs (the abbreviation FATF for companies that deal with cryptocurrencies) already registered in accordance with FATF recommendations.
Cryptocurrency
Aside from the consultation on changing the rules, the FinCEN Chamber urged industry players to get in touch, also mentioning that the regulator’s door is open to innovators of the recent decentralized finance (DeFi) wave.
“We want to hear from the industry as we are examining all the different technologies and business models operating in this space, be it decentralized exchanges or related applications,” House said, adding:
“Talk to FinCEN and meet us in innovation hours, let us know if there are specific pilot programs where you need accepted relief from certain regulatory obligations or just let us know the effectiveness of certain types of innovative technologies. This is a key priority. for us “.
Read more: FinCEN fines Bitcoin-Mixing CEO $ 60M in Landmark Crackdown on Helix, Coin Ninja
Since much of DeFi involves interacting with a smart contract (rather than an identifiable entity, or at least a departure from its creator), FATF was asked about its specific position in the $ 13.6 billion industry. . To which, Sandra Garcia, co-chair of the FATF Virtual Resources Contact Group, issued a cautionary note.
“What we’re seeing when we look at many of these new innovations is that somewhere you actually have some sort of central administrator or someone who holds the private keys that we believe fit within the FATF definitions,” Garcia said.
