on the crypto
Recent rumors of US regulation of private and self-hosted crypto wallets seem well founded. For example, the proposal submitted last month by US authorities to lower the anti-money laundering (AML) threshold for cross-border transactions seems to support the hypothesis that outgoing Treasury Secretary Steven Mnuchin is rapidly studying new rules on crypto products.
The proposed amendment from the Financial Crimes Enforcement Network (FinCEN) and the Federal Reserve would reduce the $ 3.000 to $ 250 threshold for AML compliance for any transfer - cryptocurrency or fiat (find out how buy Bitcoins in our discussion) that goes outside the United States.
User privacy concerns over this proposed change are nothing compared to fears created by Coinbase CEO Brian Armstrong's tweets about the threat to self-hosted wallets, a core principle of cryptography.
Self-hosted crypto wallet
It is important to be clear about what regulators likely mean when they talk about unhosted or self-hosted portfolios and how this relates to Financial Action Task Force (FATF) recommendations.
This involves building a compliance bridge between portfolios hosted by a virtual asset service provider (VASP) and a private or unhosted wallet. Another point to note is that the United States, if it were to enact a regulation on self-hosted wallets, would not be the first country to do so.
In Switzerland, the Financial Market Supervisory Authority (FINMA) introduced new guidelines in January 2020 requiring exchanges to implement the requirements of the travel rule on transactions over $ 1.000, where ownership of unsecured portfolios must be proven.
What does the FATF think
The issue of private portfolios has been at the forefront of the FATF's agenda this year, with a substantial link to the private sector through its Virtual Asset Contact Group (VACG), said Malcolm Wright, chair of the advisory board of the Global Digital Finance global trading group.
Meanwhile, the United States has long been one of the first countries to adopt cryptocurrency legislation which provided critical steps for the maturity of the industry, he said. Sections of the 12-month review provided by the FATF this summer hinted at the path to follow with regards to unhosted wallets.
Ban cryptocurrencies
In summary, XReg Consulting partner Siân Jones and the driving force behind a FATF-compliant messaging standard for cryptocurrencies, said the US regulatory rumors were "entirely plausible."
"Much of the rules are led by the United States, which is pushing hard for a fairly rigid regime," Jones said. Jones emphasized the linguistic nuance, under which FATF refers to "unhosted wallets", while everyone in the industry calls them "self-hosted wallets".
"I think that in itself is a telltale point," Jones said. “Politicians see the unhosted wallet as unchecked or unregulated; People in the industry see it as a matter of self-control, and therefore a very different thing ”.
