Looking at FinCEN’s “Self Custodied Wallet” rule with Peter Van Valkenburg‪h‬ from CoinCenter


I've been hearing a lot about the fincen comment period over this self custody wallet ruling that they will be making soon and a lot of people seem to be up at arms and quite a lot happening in the world right now both with the election. The bitcoin price and the lockdown so just winter in general such that. You know it's kind of hard to find oneself to care about anything especially when it's something that seems so banal as the government is asking for comments because later they might say something you might not like just in the realm of all the things that could happen and potentials that are occurring. It just seems so far off and distant. And i know that a lot of the people who are really looking into the such as yourself are really passionate about engaging on this problem so that we get the best outcome what is going on right now and why should we be concerned so you know. A lot of people are upset. I think you know first of all because this all happened over the holidays. We got an announcement from fincen. The friday before christmas and december that there was going to be a fifteen day comment period as you said for a proposed new rule that would affect bitcoin. Exchanges crypto currency exchanges in a pretty serious way. and so fincen. Is this agency in the treasury. That deals with financial surveillance. They do with so-called anti money laundering policy. But i prefer the term financial surveillance because it's really just warrantless data collection about all your financial transactions. That's the law that they deal with the bank. Secrecy act and so this comment period was to solicit public feedback in all fifteen days over the holidays and the new year's on this proposed rule change which would say hey. You're fewer crypto exchange if you got customers and you're holding bitcoin for them or other cryptocurrencies. You're already subject to the bank secrecy. Actually you already know your customers. You already file suspicious activity reports. But we're going to require some new reporting requirements and some new record keeping requirements about your customers some of which that apply to other financial institutions like kind of reports and records that banks need to keep but some of which are actually more strict more information that we want you to collect than we even require from banks and there's one particular requirement that they were proposing in that rulemaking. That basically would be very very difficult for exchanges to be able to meet and so it would lead to exchanges effectively choosing probably not to transact in certain ways because what that requirement was was this it says if your customer is starting transaction or receiving a transaction on say the bitcoin network or any other crypto currency you need to know that transactions either coming from another financial institution like crack into coin base or going to another financial institution coins to crack. And if it's not you need to know the name and physical address of the individual that it's coming or going to so we're talking just a regular old. Bitcoin wallet that i might have on ledger or tresor or something like that or just on an iphone touch if i'm sending transactions from that wallet to coin base coin base would need to know my name physical address. I mean to a customer coin mace personal. I'm actually paying. And you know as i don't need to tell you guys at all. That's not how the bitcoin network works. Bitcoin network has bitcoin addresses. And it has signatures to prove that you are. The you know sort of rightful person to be controlling the funds in those addresses or to control the ut a-x-i-o-s to be more specific so there's no name and physical address field in bitcoin transaction. Right in fact it doesn't even have to be a flesh and blood person receiving the transaction. It could be smart contract in something like that. Exactly the name physical address of any kind of you know payable machine or smart contract on any of these currency networks. So can we just put vitale. Lick taryn one theorem foundation dr. No that doesn't work for all smart smart contracts he's gonna have quite the dossier treasury no so this breaks the way these networks work and you could say well exchanges could just transfer it to your own wallet that you host yourself and then you could go and interact with smart contracts but this is sort of like an added level of complexity to using something like a smart contract or paying an individual. Who's not yourself and it's not just another level of complexity and bad for that reason. It's bad because it's not equal treatment with traditional financial institutions. So when you remove cash from your bank account or even when you send a wire from your bank account the record keeping requirements are flexible. The bank has to record all of the information you gave them about the transaction but there's certain fields like the recipient of the transaction where they only need to record the name and physical address for example if that information is available and so the law makes these excuses if you will for incomplete information at traditional financial institutions like banks. So why would we not get the same excuses at bitcoin financial institutions and. It seems as though there's just wasn't interest in providing that kind of flexibility to the crypto world that there is in the traditional financial world where most of the money laundering actually takes place. But also i mean showing its true colours where customers surveillance or consumer protections comes into play. Seems like the state tends to choose surveillance over consumer protections because as much as we tell everyone to custody their own coins. There's a large percentage of people who are a lot safer with their funds on an exchange and sending it back and forth to regular people and so taking that group of people that don't have any of those best practices and telling them now. Hey the only way for you to send or receive money is for you to self custody your coins and we're gonna see a lot of very unsophisticated. People losing a lot of

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