Originally published on December 31, 2020
I hope everyone is doing well and gearing up for a Merry Christmas! Bitcoin hit a new all time high on Sunday, December 20th, of $24,190!
As you may have heard, FinCEN issued a notice of proposed rule making — they gave a whole 15 days for comments — and propose to make Bitcoin and other digital currencies fall under the definition of monetary instrument. This means extra reporting for Banks and Money Service Businesses (MSBs). If the rule goes through, MSBs will need to keep a monetary instrument log, recording any transactions valued between $3,000 — $10,000.
The Log needs to include:
1. Type of instrument that was purchased (Indicate Bitcoin, Eth, Doge, etc.)
2. Date of purchase
3. Serial # on Monetary Instrument — (this would likely be the bitcoin transaction hash information)
4. Amount of purchase
5. Name of purchaser
6. Account Number of purchaser (if applicable)
7. Driver’s License # of purchaser
8. State of Driver’s License Issuance
9. OFAC check
10. Social Security #, TIN, or Alien ID #
11. Date of Birth
12. Address (Can’t be a PO Box)
Additionally, should this rule go through, Banks and MSBs will be required file a Currency Transaction Report (CTR) on any transactions involving Bitcoin or other digital assets worth over $10,000 in 24 hours. Previously, CTRs were only required for cash transactions.
If it passes, all MSBs will likely need to update their AML Policies in order to comply. My team and I will be here to help you through the process.
We are planning to submit comments against this rule, and it would strengthen the case if we could collaborate with some MSBs who will be substantially impacted by this proposed rule. FinCEN has requested comments centered on the costs of implementing the rule, so please consider:
Cost of collecting SSN at $3,000 level — will you lose customers?
Cost of reporting — filling out the Monetary Instrument Logs and CTRs — say they take 30 minutes each, how many will you have a month, and how much do you pay someone to create them?
Cost of data storage — you must maintain these records safely for five years — does this require any additional technology costs?
Technology constraints — I’m still not sure how MSBs are supposed to know the difference between whether they are sending to a hosted or unhosted wallet — does a Coinbase wallet have a different number sequence than a Trezor? If so, how do you identify this? Or will you now be required to have a blockchain monitoring program in place that can alert you if a wallet is unhosted? What will this cost?
I did a segment on the Tone Vays Trading Bitcoin show about this proposed rule, link is below.
Also a few late night tweets from last evening:
Tone Vays and I discussed the implications of FinCEN’s new proposed rule. Then Tone gave some great insight into the Bitcoin price — “Whatever’s the worst for humanity seems to be the best for Bitcoin Price.” Sad but it seems to be true.