• Deborah

On December 18, 2020, the Financial Crimes Enforcement Network (FinCEN) issued a notice for rulemaking requesting public comments on its proposal to 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 (“legal tender digital assets” or “LTDA”) held in unhosted wallets (i.e. wallets held by a financial institution not subject to the BSA requirements), or held in wallets hosted in a jurisdiction identified by FinCEN.

The proposal includes the following key points:

Proposed Expansion of Reporting Requirements:

  • This would, among others, be applicable to transactions involving CVC or LTDA between a bank’s or MSB’s hosted wallet customer and an unhosted or otherwise cover wallet either.

  • Reporting requirement would apply to transactions in CVC or LTDA that aggregated more than 10 000$ in one day.

  • Aggregation requirement similar to the Currency Transaction Report (CTR) requirement would apply when the total value of a person’s CVC or LTDA transactions plus the person’s currency transactions is greater than 10 000 $ threshold in a 24-hour period.

  • An exemption relating to the reporting requirement would apply to transactions between hosted wallets held at financial institutions subject to the BSA.

Recordkeeping and Verification Requirements for Transactions Over 3 000$:

  • The proposed rule would add a new record keeping requirement requiring banks and MSBs to keep records and verify the identity of their hosted wallet customers, when the latter engage in transactions (withdrawal, exchange or other payment or transfer) in unhosted wallets or otherwise covered walled with a value of more than 3 000 $.

  • This requirement would not apply to transaction between hosted wallets.

  • With regard to counterparty information, banks and MSBs would be required to at least collect the name and physical address of each counterparty.

  • Transactions over 10 000 would thus be subject to both reporting and record keeping requirements.

Comments are to be provided in a short 15 days window and before January 4th, 2021.

More details on the proposal can be found here


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