Financial Crimes Enforcement Network
P.O. Box 39
Vienna, VA 22183
FinCEN Docket No. FINCEN-2020-0020, RIN 1506-AB47
January 4, 2020
Dear Sir or Madam,
The proposed regulations on currency transaction reports and record-keeping seem to require that banks and money services businesses (MSBs) be able to prove that an identified counterparty to a transaction indeed owns one or more particular cryptocurrency addresses, when that counterparty uses an unhosted wallet and the transaction is over $3,000 in value. (The $3,000 mark would invoke the record-keeping requirement, while the $10,000 mark would also invoke the currency transaction report requirement.)
The proposal makes no explicit distinction between withdrawals and deposits, so I assume that the aforementioned proof of ownership requirement would apply to both types of transactions if they exceed $3,000 and involve a counterparty with an unhosted wallet.
From here on out, I will call any procedure or measure that attempts to prove the ownership connection between a counterparty’s identity and one or more cryptocurrency addresses, as an “address verification procedure.” I will refer to the general process itself as “address verification.”
In my country of residence, the Netherlands, the central bank rushed through address verification last fall for those transactions from exchanges and custodians which involve withdrawals to an unhosted wallet. By contrast to your proposal, address verification is required in the Netherlands on withdrawals in these cases regardless of the transaction value. Address verification is not a requirement for deposits from an unhosted wallet.
As a long-time consultant and educator within the cryptocurrency ecosystem, I have given extensive consideration to the practicality and desirability of address verification in light of the measures that have recently been taken by the Dutch central bank (De…