SDF’s Comment Letter on FinCEN NPRM

Yesterday, we submitted a comment letter on behalf of SDF to the Financial Crimes Enforcement Network in response to their Notice of Proposed Rulemaking on “Requirements for Certain Transactions Involving Convertible Virtual Currency or Digital Assets” – or NPRM, for short.

We were joined by countless organizations throughout our industry voicing their concern over the far-reaching consequences of this proposal on blockchain and cryptocurrency ecosystems. Despite the unusually short comment period that breaks with the standards and practices designed for transparent policy and rulemaking, we’ve worked tirelessly over the last two weeks to formally share our deep concerns over the impact this rule would have if implemented – concerns like:

• How the NPRM’s discussion of digital asset wallets reveals a deep misunderstanding of blockchain architecture, that could be rectified with closer public-private dialogue;
• How the NPRM overlooks the tremendous benefits of self-hosted wallets to the growth of the digital economy and financial inclusion;
• The risk of the NPRM to actually complicate and frustrate law enforcement investigations involving convertible virtual currency, rather than help;
• The risk of the NPRM to introduce new cybersecurity and privacy risks for the public that outweigh any law enforcement benefit; and,
• How the NPRM will hinder U.S. global competitiveness, discourage domestic innovation and incentivize offshoring of a critical technology.

You can read more about these concerns and others in our full comment letter here.

There is an important message I want to emphasize to our ecosystem and to the regulators at FinCEN from this letter: New technology deserves new approaches to regulation. The proposal from FinCEN seeks to apply a regulatory framework designed for a centralized, intermediary-based financial system. That’s not blockchain. Foisting antiquated rules onto entirely new paradigms doesn’t work - and it won’t work here.

Preventing criminals and other bad actors from misusing blockchain technology and networks is good for society and good for the long-term growth and success of the blockchain industry. I invite FinCEN and all global regulators to bring industry into the conversation early and often, to give us the time to share what makes this technology unique - and how it can be leveraged to combat illicit activity. We can both learn from one another. That way, any future regulation will represent new thinking - and not falling back on legacy systems - in a way that truly maximizes the net benefits of regulations in this cutting-edge field.