Many in the Web3 space are likely having flashbacks to December 2020. When the Treasury Department initially suggested imposing Know Your Customer, or KYC, restrictions on transactions involving self-custodied crypto wallets.
In fact, a phrase labelled “Requirements for some transactions involving convertible virtual currency or digital assets” appears in the Treasury’s semiannual agenda. And regulatory plan, which intended to inform the public about the department’s ongoing regulation operations and invite public feedback.
It proposes that banks and money service providers “submit reports, retain records, as well as verify the identification of consumers”. When dealing with monies held in unhosted wallets, according to the Treasury’s Financial Crimes Enforcement Network, or FinCEN.
Unhosted (also known as self-hosted) wallets are ones that are not controllable by a financial institution or service intermediary, according to FinCEN. “Users of these wallets interact directly with a virtual currency system. And have independent control over the transmission of value,” according to the company.
If the value of the transaction surpassed $3,000. The rule proposed in December 2020 would have forced registered cryptocurrency exchanges to acquire personal information from their users trading using an unhosted wallet. The restriction would apply to someone sending money from an exchange account to their personal wallet.
Significant national security concerns
The proposal, which introduced in the final days of Secretary of the Treasury Steven Mnuchin‘s tenure, repealed after widespread business opposition.
Mnuchin claimed at the time that the rule addressed “significant national security concerns” about the bitcoin sector. The return of the agency’s attention to self-hosted wallets could be related to the executive order. That the Biden administration is apparently preparing, which will focus on “crypto as a national security danger.”
However, just because a rule is on the Treasury’s semiannual agenda does not indicate it will be implemented.