The Biden administration will soon have to settle a bitcoin battle it hasn’t even started, and its decision could have far-reaching implications for the virtual currency industry.
The battle concerns last minute rules proposed by the outgoing Trump administration that would place new demands on financial services companies to record the identities of cryptocurrency holders. The measures are intended to suppress attempts to use Bitcoin and other cryptocurrencies for money laundering or to finance illegal activities. According to some analysts, cryptocurrency prices could fall if they are adopted.
K Street and Wall Street heavyweights have rallied against the rule, including the U.S. Chamber of Commerce, mutual fund giant Fidelity Investments and venture capital firm Union Square Ventures. Cryptocurrency players like the Winklevoss twins, the Blockchain Association, and Coinbase Inc. are also battling the measures.
After President Donald Trump lost the election, the Treasury Department raced to issue the rules that came under the Financial Crimes Enforcement Network (FinCEN). The move generated thousands of negative comments and threatened a lawsuit by a crypto trading group – resulting in a short-term reparation that forwarded the final decision to the Biden administration and Treasury Secretary Janet Yellen. There is no timetable for when a decision will be made.
The proposal threatens what some consider to be Bitcoin’s strongest feature: the ability to send money without the government watching. Users whose wallets are only labeled with codes would have their real identities recorded with the financial institutions they have been zealously avoided.
If Yellen abides by the rules, crypto advocates say that some virtual currency services will become more expensive and some uses of such currencies could go away completely. If it doesn’t, some criminals can bypass US surveillance to hide money or fund terrorism.
If accepted, the regulations could lead to a sharp drop in the price of virtual currencies like Bitcoin, said Matthew Maley, chief marketing strategist at Miller Tobacco & Co., adding that the price of Bitcoin will continue to rise over the long term. At 5 p.m. on Thursday in New York, a bitcoin cost $ 47,919, up 5.7% from late February but still nearly 18% below its high on February 21.
“Bitcoin is and will continue to be very risky and very volatile. If you add something like a new rule, it is very prone to corrections, ”said Maley.
It’s about a FinCEN proposal that aims to make it harder for Bitcoin users to hide their identities. Part of the rule would require banks and money service providers such as cryptocurrency exchanges to file a report with the Treasury Department whenever a customer moves $ 10,000 or more of virtual currency to a wallet that is not hosted on an exchange. These so-called non-hosted wallets can be kept offline and are difficult to keep track of. Banks send such reports in accordance with anti-money laundering rules when customers withdraw $ 10,000 in cash.
The second part of the regulation would require banks and exchanges to keep records when their customers send $ 3,000 worth of virtual currency to someone else’s non-hosted wallet. The record would have to contain the identity of the counterparty, which Bitcoin proponents say would be expensive and sometimes impossible to verify.
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