US Treasury Proposal Applies Travel Rule to Crypto

On Dec. 18, an office within the US Treasury Department released a set of proposals regarding cross-border transfers of digital assets.

The US Treasury Financial Crimes Enforcement Network (FinCEN) released a proposal that aims to close loopholes regarding the movement of digital assets. In the announcement on the release, FinCEN also requested input from the public. The measure, called the Travel Rule, affects cross-border transfers.

Know thyself

The major thrust of the proposal is a change regarding privately owned digital wallets. Virtual Asset Service Providers will now have to require KYC information from individuals whenever the VASP sends money to a wallet. Apparently this holds even for sending crypto from a VASP to your own wallet. This seems to apply to movements of amounts over $10,000. The VASP has to report the transaction.

However, the exchange still needs to hold such information if the amount transferred is over $3,000. Thus, from the private party’s end, the KYC measures will be the same.

The proposed changes are supposed to bring this aspect of the digital asset world more in line with fiat banking. The Travel Rule is a long-standing regulation for cross-border transfers.

The government is including Central Bank Digital Currencies (CBDCs) in this regulation. However, FinCEN calls CBDC by a different name: Legal Tender Digital Asset, LTDA.

Not Treasury’s idea

Privacy-lovers will moan at the US Treasury’s proposed regulation, but the impetus for the change is clear. The changes will bring the American digital asset environment closer to that of fiat-related banking. Moreover, they will also meet the recommendations of the Financial Action Task Force FATF) from 2019. Actually, in FATF terms, the US is a little late – this should have been done over the summer. 

But FinCEN does have an idea

FinCEN’s proposal comes on the heels of a proposal to reduce the non-reporting limit from $3,000 to $250. This would affect both fiat and crypto cross border transactions. FinCEN claims that the change will aid both law enforcement and national security interests. Comments from the public were accepted through mid-November.

The dark side of the fiat

The measures come as the effects of leaked FinCEN files ripple through the markets. BeInCrypto reported on Oct. 13 that the files show that banks laundered at least $2 trillion in fiat  between 1999 and 2017. According to the documents, at least $1.3 trillion of this passed through Deutsche Bank.

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James Hydzik is a finance and technology writer and editor based in Kyiv, Ukraine. He is especially interested in the development of regulation in the face of increasingly rapid technological change. He previously covered the CEE region for Financial Times banking and FDI magazines. An ardent believer in gut renovating eastern Europe one flat at a time, he currently holds more home renovation gear than crypto.

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