Monday, May 10, 2021

Janet Yellen to consider limiting the use of cryptocurrency

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Cryptocurrencies could come under renewed regulatory scrutiny over the next four years if Janet Yellen, Joe Biden’s choice to head the Treasury Department, succeeds. At Yellen’s confirmation hearing on Tuesday before the Senate Finance Committee, Senator Maggie Hassan (D-New Hampshire) asked Yellen about the use of cryptocurrency by terrorists and other criminals.

“Cryptocurrencies are of particular concern,” Yellen replied. “I think a lot of it is used – at least in the transactional sense – primarily for illicit financing.”

She said she wanted to “look at ways to reduce their use and make sure that [money laundering] does not occur through these channels. “

Blockchain-based financial networks are attractive to criminals because they do not require users to identify themselves – as the law requires for most conventional financial networks. Since no individual or organization controls these networks, there is no easy way for governments to force them to comply with money laundering laws.

So instead of trying to force the networks themselves to comply, regulators in the US – and many other jurisdictions – have focused on regulating bitcoin exchanges that help users trade between dollars and crypto. -coins. Once a bitcoin exchange identifies who initially received a particular bitcoin payment, law enforcement can often trace subsequent payments through the open payment ledger of a blockchain network.

In December, Trump’s outgoing team at the Financial Crimes Enforcement Network – a unit of the Treasury Department focused on money laundering –proposed a new set of rules to tighten the screws on cryptocurrency-based money laundering.

Under the new rules, cryptocurrency-based exchanges are expected to file transaction reports with FinCEN whenever a client makes a cryptocurrency transaction worth more than $ 10,000. This would reflect existing rules requiring conventional banks to report cash withdrawals or deposits valued above $ 10,000.

Even more controversial in the cryptocurrency world, FinCEN wants to impose new record-keeping requirements for transactions involving users who manage their own private keys – dubbed “unhosted wallets” by FinCEN. According to FinCEN’s proposal, if the client of a cryptocurrency exchange sends more than $ 3,000 to an unhosted wallet, the exchange would be required to keep a record of the transaction, including the identity of the client who initiated the payment.

These new rules didn’t take effect until Trump stepped down, so Biden’s incoming team will have to decide what to do with them. The Biden administration could approve existing rules, rewrite them, or delete them entirely. Yellen’s comments on Tuesday suggest she is unlikely to drop the rules. If anything, the Treasury Department will likely consider additional regulations for the blockchain economy over the next four years.

This story originally appeared on Ars Technica.


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