On Monday, January 4, we filed a public comment in response to FinCEN’s notice of proposed rulemaking that would require banks and money services businesses to collect, and in some cases report to the government, sensitive personal information in connection with certain crypto transactions with self-hosted (or as FinCEN refers to them “unhosted”) wallets.
For the past eight years, we at Blockchain Capital have been directly investing in the future of an open, free, fair and safe global financial ecosystem that allows for increased financial access and the flourishing of innovation. It has been a great joy to the see the industry evolve so extensively over that time. That evolution has also brought about the challenge of assessing how regulation should attach to this new technology and asset class. Meeting this challenge is a natural and important part of the maturation of a nascent industry. We firmly agree that combating money laundering, terrorist financing and other illicit financial activity is critical to the ongoing health and growth of an evolving financial infrastructure. However, regulations aimed at protecting our financial infrastructure must be appropriately tailored to effectively combat illicit activity while also protecting individual freedoms and promoting innovation. We believe FinCEN’s proposed rulemaking does neither.
In our view, FinCEN has made an alarmingly hasty and ill-considered rulemaking proposal. If implemented, the proposed rule will disproportionately infringe on individual rights of privacy and disenfranchise underrepresented populations in the US from the benefits of open financial access. Even more concerning is that the rule could result in actual harm to millions of users of digital assets by increasing cyber and financial crime, not combating it. These fatal deficiencies will cause both entrepreneurs and investors involved in building out this new technology to seek out jurisdictions that are more thoughtful and deliberate in crafting functional regulation. This would hurt US innovation and competition in what could be the future technological foundation for global finance and commerce.
We, along with many of the entrepreneurs behind our over 90 portfolio investments, are eager to engage with FinCEN and the Treasury Department to craft effective and measured regulation for decentralized systems. There are thousands of other industry participants who are hopeful to do the same. At present, however, the industry has not been granted a meaningful opportunity to do so. Providing a mere 15 days over the Christmas and New Year’s holidays for public comment on this immensely complex subject is woefully inadequate. For this reason, we have filed the attached letter requesting that FinCEN abandon its proposed rule.