SDF’s Supplemental Comment Letter on FinCEN’s NPRM

Back in January, SDF submitted a letter to the Financial Crimes Enforcement Network (FinCEN) in response to their Notice of Proposed Rulemaking on “Requirements for Certain Transactions Involving Convertible Virtual Currency or Digital Assets” – or NPRM. That first letter was borne out of a pressing need throughout the industry to, at a minimum, delay implementation of a last-minute rule process that largely left innovators out of the conversation, even though it would have significant consequences for blockchain and cryptocurrency ecosystems.

Thankfully, FinCEN extended their initial comment period to give industry voices like ours more time to share our thoughts on this rule and its potentially detrimental effects on our industry. As a result, over the last few months, we’ve been working with key stakeholders, like the Blockchain Association, the Chamber of Digital Commerce, and FinClusive, to articulate the most troubling aspects of this proposed rule. Yesterday, in accordance with FinCEN’s revised comment deadline, we submitted our supplemental comment letter sharing those concerns, which you can read in full here.

In our supplemental letter, which builds on much of what we laid out in early January, we come back to a few main points that we believe should shape the next steps of the NPRM:

• FinCEN should suspend further action pursuant to the NPRM until all relevant studies, in particular those related to the efficacy of existing current currency transaction and suspicious activity reports, mandated by the Anti-Money Laundering Act of 2020 have been completed.
• FinCEN should not proceed with rulemaking in this area until it has fully evaluated the impact of de-risking on the global poor and other marginalized communities driven by past AML regulations.
• FinCEN should abandon the NPRM’s reporting requirements, in lieu of an appropriately calibrated recordkeeping requirement that would comport with the intent of the AMLA and more effectively achieve FinCEN’s objectives.
  

In the end, we strongly hope that if the NPRM moves to a final rule, FinCEN takes these considerations into account. But our ultimate goal is to see proposals that are more tailored to blockchain because, as we’ve said many times before, new technology deserves new approaches to regulation. No matter how you slice it, the FinCEN NPRM seeks to apply a regulatory framework designed for a centralized, intermediary-based financial system. That’s not suited for blockchain. We look forward to the role we can play to help future regulation represent new thinking that accounts for what makes this technology unique and how it can help regulators and innovators achieve their shared goals.