The US Treasury is on the way to regulating non-hosted portfolios

    The US Treasury is on the way to regulating non-hosted portfolios

    The US Treasury is addressing the anonymity of non-hosted cryptocurrency wallets as part of Joe Biden’s broader strategy to deal with illicit financing that includes digital assets.

    By following two regulations proposed by the Financial Crimes Enforcement Network (FinCEN) in 2020, which require the reporting of transactions over $10,000 for non-hosted wallets and require banks to collect information about the customer and their counterparty for any higher $3,000 transactions involving the US Wali Ademo, who is not hosted, said the government agency had made progress.

    Speaking to Ijma 2022, Ademo emphasized that:

    “…We are working to address the unique risks associated with non-hosted wallets… Essentially, financial institutions need to know who they are dealing with and doing business with to ensure that they are not making payments to criminals, sanctioned entities, or others. As for non-hosted wallets. We are working to provide them with the information needed to avoid facilitating this type of illegal payment.”

    Increased controls on non-hosted wallets emerged after sanctions were imposed on the Russian Federation following the invasion of Ukraine. However, evidence of Russians using cryptocurrencies to evade such sanctions is scant.

    Treasury: Won’t Violate Privacy Travel Rule

    Without going into detail, Adeyemo then described the travel rule, which would reveal the true identities of those sending and receiving encrypted money to all financial institutions involved in a transaction, to protect national security and enforce bank secrecy law.

    To address concerns about privacy breaches, Ademo said the agency is determined to craft regulations that favor the broader goal of national security, while enabling innovation in payment technologies.

    America’s international standing and its ability to protect national security depend to a large extent on our global financial stewardship. We in government know, you know, that the future of the global financial system is increasingly digital.”

    Organizational trends come from multiple directions

    The Treasury Department’s response follows an executive order issued by US President Joe Biden requiring several government agencies to research cryptocurrencies. These agencies include the Treasury, the Securities and Exchange Commission, and the Office of the Comptroller of the Currency.

    Section 7 of the executive order addresses the risks associated with cybercrime involving cryptocurrencies and requires the Secretary of the Treasury and six other government officials to submit additional annexes to the president describing their views on “the illicit financial risks posed by digital assets.” , including cryptocurrencies, stablecoins, cryptocurrencies, and trends in the use of digital assets by illicit actors” within 90 days of submission to another agency, the National Counterterrorism and Other Illegal Financing Strategy Conference.

    Within 120 days of submitting the National Counterterrorism and Illicit Financing Strategy to Congress, the Secretary of the Treasury and others will have to submit a coordinated interagency plan to mitigate the risks of illicit financing.

    The Treasury Department joins Senator Cynthia Loomis (R-Wyo) and Senator Kiers Gillibrand (D-NY), who released a draft list earlier this week. Although introduced recently, the new bill won’t come into effect until at least 2023, given that the upcoming midterm elections are a priority. In its current form, the bill spells out what types of stablecoins are allowed, which cryptocurrencies fall within the jurisdiction of the CFTC, and which fall within the jurisdiction of the Securities and Exchange Commission (SEC).

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