FinCEN's Proposed Digital Asset Transaction Rule

The Financial Crimes Enforcement Network (FinCEN) proposed the “Requirements for Certain Transactions Involving Convertible Virtual Currency or Digital Assets” rule on Friday. It has the stated goal of combating money laundering and the financing of terrorism. The blockchain community can and should embrace this goal. However, for many reasons, that’s not what this rule, which has largely been developed behind closed doors, would accomplish. The proposed rule was drafted and published without providing sufficient engagement from the industry and the public, resulting in a proposal that we believe would actually hinder law enforcement’s efforts to investigate and deter financial crimes. It also is likely to have significant unintended consequences by unduly burdening decentralized public networks, stifling innovation that is working to broaden financial access and inclusion, and disadvantaging law-abiding Americans who are increasingly embracing these new technologies.

The proposal allows just 12 days for public comment on 24 specific areas. We believe that policymaking of this magnitude is best suited for the rigorous, open, and deliberative law-making process of Congress. Still, SDF intends to comment and to continue to engage in the process on behalf of the Stellar ecosystem to raise our substantive concerns with the proposed rule in line with our commitment to education, advocacy, and support for reasonable regulations designed to prevent financial crime. As we've said before, and will continue to repeat, creating the right policy and regulatory frameworks for blockchain technology will come from close collaboration and partnership between the public and private sector.

We encourage others concerned about this rule proposal and the process by which it has been imposed to submit their own comments. The comment period opens December 23, and the comment deadline is January 4, 2021. Comments may be submitted through the Federal E-rulemaking Portal, http://www.regulations.gov, where instructions for submitting comments are also available. Refer to Docket Number FINCEN-2020-0020 and RIN number 1506-AB47.