In December of last year, the Financial Crimes Enforcement Network (FinCEN) introduced a rule change that has big implications.
With the price of BitCoin breaking $50,000, newly minted millionaires are in abundance and the United States Treasury wants to make sure they can follow the money at any given time.
Under the auspices of fighting terrorism and illegal trafficking, the proposed rule will require banks to “gather, maintain and report information about customers engaging in virtual currency transactions with unhosted wallets.”
For those not familiar with Cryptocurrency, “wallets” are where you keep your digital currency. Hosted wallets are more like banks. You don’t have possession of your currency, they’re simply holding it for you no different than a bank holds your dollars.
An unhosted wallet is akin to stuffing gold coins into a safe or under your mattress.
You maintain sole possession over your cryptocurrency in an unhosted wallet. No one aside from you knows how much you have under your pillow and if you lose it . . . sorry, it’s gone.
Here’s the catch, cryptocurrency has to get to your unhosted wallet through the blockchain (like the ATM network of tradition banks except transparent to the public).
And that’s where the government wants to step in.
If a bank or a hosted wallet service accepts or sends a transaction to an unhosted wallet, they want to know the identity of the formerly anonymous person on the other end.
The move by the feds will give them a strong grip to pull back the veil of privacy of crypto holders and the last bastion of financial freedom will be far less free.
Comments to the rule are open to the public until March 29th.