What’s Next for Treasury’s Proposed Rule for Digital Assets?
February 10, 2021
In late December 2020, the Financial Crimes Enforcement Network (FinCEN) published a lengthy and complex notice of proposed rulemaking (NPRM) to impose potentially devastating reporting and recordkeeping requirements on digital asset transactions involving the use of self-managed wallets (read our blog on the NPRM’s impact here). For example, the proposed verification requirements for banks and MSBs would create a new standard that significantly exceeds existing know-your-customer (KYC) obligations that would erode financial privacy for lawful transactions.
The repercussions of such new rules cannot be understated.
In addition to the dramatic negative impact that the proposed rule would have, the U.S. Department of the Treasury only provided 12 days to comment on their proposed action during a period spanning two federal holidays and two weekends. This effectively truncated the comment period to a mere 6 business days.
Rome wasn’t built in a day; nor should policies impacting the future foundation of the global economy. The Chamber of Digital Commerce recognized the effect such a “midnight rulemaking” could have for the digital asset industry and spearheaded an advocacy effort on behalf of its members and the broader industry.
Beyond our petition, which garnered over 5,000 signatures, as well as through outreach to industry leaders and then-Treasury Secretary Mnuchin (read our Letter to Secretary Mnunchin here), the initial focus was pressing for an extension of the comment period. In addition to the commonsense requirement for reasonable time to comment on a significant set of new proposals, policymakers need time to understand the effect such rules could have on these emerging technologies for the U.S. economy.
The Chamber was pleased to learn, per our request to Secretary Mnuchin and our comment letter, that on January 14th, FinCEN reopened the comment period and added 15 more days to comment, extending the comment deadline into the new Administration, which subsequently froze rulemaking activity. The comment period was extended again on January 26th by 60 days, the amount we requested. This was a critical success. The Chamber’s coordinated efforts made a huge impact on preventing this rushed rule from being imposed on the blockchain industry without proper time to consider its consequences.
However, our work is not over!
The industry now has the opportunity to further consider the proposed regulations’ impact and the Chamber is currently working with our members to develop additional comments to FinCEN.
We are also engaging with leadership under the new Administration on sound policies that address illicit activity concerns while not stifling the development of this nascent, yet critically important technology.
The United States has some catching up to do.
As with any technology with global implications, blockchain innovators in the United States are competing against industry leaders across Asia and Europe. Many of them are startups in countries with far more developed policy frameworks for digital assets and blockchain. All of those countries desire to be the next “Silicon Valley” for the digital tools that will be the foundation for the global economy moving forward for government, businesses, and consumers.
Recent history shows that when U.S. policymakers work collaboratively with the industries investing and innovating in the emerging technologies, rules of the road can be developed that both spur investment and innovation, protect consumers and businesses, and enhance America’s global leadership.
If the United States expects to capture a global leadership position in this transformative industry, the Biden Administration and Congress must make clear that addressing digital asset and blockchain policies are a priority. As new and hold-over legislation from the 116th Congress are introduced and federal agencies begin to lay out their policy agendas for the coming four years, the Chamber of Digital Commerce and its members look forward to helping shape a national policy framework for blockchain technology that will lay the foundation for America’s leadership role.
BE PART OF A UNIFIED VOICE FOR THE BLOCKCHAIN TECHNOLOGY ECOSYSTEM
BE PART OF THE UNIFIED VOICE FOR THE BLOCKCHAIN TECHNOLOGY ECOSYSTEM