Good and bad: Treasury delays cold wallet monitoring rule

It’s hard to say if this is good news or bad news for the cryptocurrency industry, but the U.S. Treasury has extended the comment period for its controversial new rule imposing regulatory oversight of private cold wallets another 60 days.

Proposed on Dec. 18, the regulation would require exchanges to collect personal know-your-customer data from private or “unhosted” cold wallets on the sending or receiving end of transactions of more than $3,000.

The Financial Crimes Enforcement Network (FinCEN) originally gave the proposal an unheard of 15-day comment period, which included the Christmas and New Year’s holidays. That’s far shorter than the standard 60-day comment period, and led to accusations the Financial Crimes Enforcement Network (FinCEN) was trying to cram through a “midnight rule” on a controversial topic before the Biden administration took over. 

Noting that FinCEN had positioned the rule as an urgent matter of national security, Coin Center Communication Director Neeraj Agrawal commented:

“Funny how the national security requirement to ram it through immediately disappeared when a new admin came in.”

While the extension is good news as it gives the industry more time to fight the proposal, the bad news is that FinCEN is still pushing it after anti-crypto Trump-administration Treasury Secretary Steven Mnuchin was replaced by Janet Yellen.

The cryptocurrency industry remains uncertain of how Yellen will treat the industry. After first saying she wanted to “curtail” digital assets in her confirmation hearings, Yellen said in her written statement to the Senate Finance Committee that it is “important we consider the benefits of cryptocurrencies and other digital assets, and the potential they have to improve the efficiency of the financial system.”

Peter Van Valkenburgh, director of research at crypto-focused think tank Coin Center, tweeted that the extension announcement “[s]eems to confirm what we had feared: this rule-making was *not* frozen” by the incoming Biden administration. The new President ordered a halt to all rule-making to give his administration time to review them.

Van Valkenburgh added that the FinCEN announcement of a separate 60-day extension to the comment period suggests that it was exempted from the freeze as it was framed as a national security requirement under Mnuchin.

Still, he added, the FinCEN announcement “is not too bad” as “FinCEN (now apparently no longer pressed by Trump admin) is being generous with time.”

Van Valkenburgh said the extra time “gives us hope that we can narrow the proposed rule down to just Currency Transaction Reports that are 100% equivalent to reports triggered by [$10,000] cash transactions at banks. That would be equal treatment for our electronic cash tech. Not a bad result.”