We write to advise you of important legislation just enacted in the United States and proposed legislation in the United Kingdom. The National Defense Authorization Act.
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In December 2020, Congress passed the National Defense Authorization Act for Fiscal Year 2021 (“Defense Act”),[1] which includes significant reforms to the United States’ monitoring system for financial crimes. Although President Donald Trump vetoed the Defense Act, the Senate voted to override the President’s veto on January 1, 2021.
As part of the Defense Act, the Anti-Money Laundering Act of 2020 and the Corporate Transparency Act included therein imposes new requirements for the reporting of beneficial ownership information to the Financial Crimes Enforcement Network (“FinCEN”). The Corporate Transparency Act also authorizes FinCEN to share beneficial ownership information with domestic and foreign law enforcement authorities in certain circumstances, and it directs FinCEN to issue regulations to implement the new beneficial ownership reporting requirements within one year of the statute’s enactment.
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A new proposal would subject financial institutions and exchanges to onerous recordkeeping and reporting requirements for certain digital currency transactions.
In a surprise release in the waning days of the Trump administration, the Financial Crimes Enforcement Network (FinCEN) division of the Department of the Treasury issued a proposed rule (the Proposal) that would impose significant new obligations on market participants in the cryptocurrency and digital asset market (Requirements for Certain Transactions Involving Convertible Virtual Currency or Digital Assets). The Proposal “would require banks and money service businesses (MSBs) to submit reports, keep records, and verify the identity of customers in relation to transactions involving convertible virtual currency (CVC) or digital assets with legal tender status (LTDA) held in unhosted wallets, or held in wallets hosted in a jurisdiction identified by FinCEN.”
Updated Jan 14, 2021 at 3:55 p.m. UTC
DC Magistrate Judge Calls Unhosted Wallet ‘Horror Story’ a ‘Fiction’
Federal Magistrate Judge Zia M. Faruqui has learned to stop worrying and love unhosted wallets.
“The horror story of unhosted wallets is fiction, not fact,” wrote the judge in a Jan. 6 memorandum opinion for D.C. District Court. He quoted a Coin Center thinkpiece (also named in Strangelovian fashion) on the downside of over-regulating unhosted wallets, then added his own summation:
“Indeed, cash poses a greater challenge to law enforcement than cryptocurrency in unhosted wallets.”
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