FINCEN proposes for crackdown of Virtual Currency transfers

The Financial Crimes Enforcement Network (FINCEN) functioning under the treasury of the US has come up with a proposal for converting virtual currencies. Hence forth banks and other intermediaries have to maintain appropriate records and conduct due diligence for such transactions besides reporting the same. The ideology behind this proposal is that the anti-money laundering watchdog is stubborn in closing the loop holes that could be exploited through virtual currency transactions.

Critics say that virtual currencies like bitcoins enable easy access to illegal activities while the crypto advocates mention that the blockchain technology that governs the virtual currency transactions are difficult to be hacked and its digital ledgers can be tracked easily unlike the cash transactions thus supporting the law enforcement agencies. The treasury department is welcoming public comments on the said proposal for the next 15 days. It is certain that the amended restrictions would burden the crypto exchanges severely.

The treasury department reports that the proposal is in accordance with the existing guidelines and its objective is to safeguard national security and boost up the transparency amongst the law enforcement agencies. Due to the current pandemic that has paralysed the global economy, investors are seeking crypto currencies as alternate source of investment and bitcoin was traded for a high value of $20,000 earlier this week

The rule primarily concentrates on unhosted wallets which don’t operate under a registered exchange or at a bank. If this rule gets implemented, exchanges transferring funds to such self hosted wallets need to carry out strict compliance and due diligence procedures which would involve lot of operating cost and time. Crypto currencies have started to constitute a measurably significant portion of the global financial system. FINCEN through its stringent governance and guidelines on crypto transactions is setting a remarkable example for other regulators across the globe.


Author: Rajashree, MBA, CAMI

(PonSun AML Academy)