Republican U.S. senators ask FinCEN to reconsider controversial crypto rules

In an open letter to Treasury Secretary Janet Yellen, Republican Senator Pat Toomey (R-Pa.) wrote that the proposed Financial Crimes Enforcement Network (FinCEN) counterparty rule would place a heavy burden on cryptocurrency companies and may fail to combat illegal activity.

He also described the draft Financial Action Task Force (FATF) guidance as “worrying”.

“Cryptocurrencies will dramatically improve consumers’ privacy, access to financial services, and the power to make decisions for themselves,” the letter said. “Some believe that cryptocurrency is a technology that has the potential to be as revolutionary as the internet.”

Cryptocurrencies have played a major role in the rise of fintech. Cryptocurrencies connect one person to another through open public networks, independent of government control or other financial intermediaries.

As previously reported by BitPush, FinCEN released a proposed rule on December 18, 2020: banks and cryptocurrency exchanges must store the names and addresses of customers whose cryptocurrency transactions exceed $3,000. These businesses must also report all customer transactions involving self-hosted wallets exceeding $10,000.

The letter states that FinCEN's proposed rule may also be counterproductive in combating illegal activity, potentially causing illegal transactions to become more difficult to track than would otherwise be the case. By limiting individuals' privacy and ability to transact with financial institutions, the rule may drive bad actors to exploit methods that do not interact with financial institutions. As a result, such cryptocurrency transactions will be less susceptible to proper government oversight and detection.

Additionally, the U.S. Securities and Exchange Commission’s (SEC) Office of Investor Education and Advocacy (OIEA) issued an investor advisory warning of some of the risks associated with funds holding bitcoin futures.

The agency noted that investors may be vulnerable to fraud or manipulation in the futures markets: "Investors should understand that Bitcoin, including exposure through the Bitcoin futures markets, is a highly speculative investment. Therefore, investors should consider the volatility of Bitcoin and Bitcoin futures markets, as well as the lack of regulation and the potential for fraud or manipulation in Bitcoin markets."

The rise in the price of Bitcoin and other crypto assets has raised concerns about market manipulation, and both Democrats and Republicans in the U.S. Congress have made cryptocurrency regulation a priority. Recently, the U.S. government has become more determined to strengthen supervision of the cryptocurrency market.