In the late afternoon on the Friday before Christmas, the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) proposed a regulation introducing data collection and reporting requirements for cryptocurrency. FinCEN gave the public only 15 days to comment, over the holidays, instead of the usual 60 days. This was a clear attempt to push through a midnight regulation without giving the public time to respond, and it backfired. Despite the short timeline, roughly 7,500 people and entities submitted comments decrying the proposal, the most FinCEN has received on any proposed rulemaking. The comments on this proposal constitute nearly 70% of all comments FinCEN has received on all rule-makings since 2008 combined.
Marta Belcher, a cryptocurrency and civil liberties attorney, is special counsel to the Electronic Frontier Foundation, general counsel to Protocol Labs and an attorney at Ropes & Gray. She is also Board Chair of the Filecoin Foundation and the Filecoin Foundation for the Decentralized Web. Her views are her own.
So many people spoke up about this proposed regulation because it is a blatant violation of civil liberties. The proposal would require certain businesses like cryptocurrency exchanges to collect identity data not just about their own customers but also about non-customers who transact with their customers, and to keep that data and hand it over to the federal government when the transactions exceed a certain amount. This would give the government access to troves of sensitive financial data, going well beyond FinCEN’s requirements for non-cryptocurrency transactions.
In addition, the regulation would give the government far more data than what the regulation itself even contemplates. The proposed regulation would give the government the identities associated with cryptocurrency wallet addresses. Because of the nature of public blockchains, that means the government would know the identity associated with all transactions for those wallet addresses, even when the amounts of those transactions are far below the reporting threshold.