In the last hours, Square joined the companies that reject the proposal. Jack Dorsey believes that the proposal would harm the industry in the United States.
More than 6,500 bitcoin (BTC) and exchange users responded to the proposal of the United States Office of Financial Crime Control (FinCEN). Companies like Coinbase, Square, Kraken, Gemini, and a16z, among many others, oppose the Treasury requesting personal data from users who want to keep their bitcoins in self-custody wallets.
“This creates unnecessary friction and perverse incentives for cryptocurrency customers to bypass regulated entities for transactions,” Jack Dorsey said in a letter to FinCEN. In addition to being the co-founder of the social network Twitter, this developer is responsible for Square, a financial services company.
Another risk that the CEO of Square observes in the proposal is that it “will lead [customers] to use wallets or non-custodial services outside the United States, so as not to depend on a third party.” All this, as he explained, would add obstacles that would harm the industry.
The Square Company has part of its funds in bitcoin. For its CEO, who was insistent on the matter in the abovementioned letter, “the regulations that unnecessarily restrict the future of cryptocurrencies are deeply worrying.”
Dorsey dedicated a big part of the text to explain the differences between cryptocurrency transfers and money movements in traditional finance. He explained in every detail the “technological limitations that will make it difficult to identify and collect the information of the required counterpart.” One of these requirements, for example, is geolocation, which is usually not identifiable.
As an alternative, the founder of Twitter and Square highlighted anti-money laundering (AML) policies, which companies themselves already implement on their own and which, he said, “have exceeded those of legacy institutions.” This work was previously praised by FinCEN. In contrast, if the new proposal is applied, this would change.
“Flexible and risk-based regulation enables compliance programs to be more comprehensive and, in fact, mitigate risk through the use of tools compatible with blockchain technology,” said the sender of the letter. He added an example of how his company uses blockchain analysis to identify signs of illegal activity.
This attempt to regulate bitcoin use, is it a negative factor?
At the end of December 2020, the exchanges of Kraken and Coinbase had already spoken out on this topic. Among other observations, they rejected the deadline for submitting opinions that expired on January 4, a period that they considered insufficient.
More recently, Andreessen Horowitz, a venture capital firm also known as a16z, spoke out on the matter. He considered that FinCEN’s proposal “apparently aimed at combating financial crime, would require various crypto entities to collect and report detailed personal data of their clients, a standard that does not apply to any other sector of the financial industry.”
This company predicts that “such misguided regulation will have many foreseeable and unforeseen negative consequences.” For this reason, they ask FinCEN to withdraw the proposal or, at least, create an extension of the comment period as well as being also open to dialogue with the involved parties.
Bitcoin users also spoke out on the subject in a particular way. For example, this was the case with Edward Hearne, who identified himself as a trader and investor with 30 years of experience. He considers that the proposal is deficient, and its effects will foreseeably be undesirable for all parts of this industry.
By: Jenson Nuñez.