This letter was shared with FinCEN Director Kenneth Blanco on January 25, 2021. Download here.
January 25, 2021
Via email to firstname.lastname@example.org and email@example.com
Director of Financial Crime Enforcement Network
U.S. Treasury Department
PO Box 39
Vienna, Virginia 22183
Reply: Biden government rulemaking suspended; material number FINCEN-2020–0020, RIN #1506-AB47
Dear Director Bai:
After receiving unprecedented public comments in the proposed rulemaking notice “Requirements for certain transactions involving convertible virtual currencies or digital assets” (December 23, 2020), Coinbase would like to thank FinCEN for its decision on January 14, 2021 The decision to reopen the consultation period put forward reporting and record keeping requirements for various cryptocurrency transactions. Requirements for certain transactions involving convertible virtual currencies or digital assets, Fed 86. Reg. 3897 (January 15, 2021). Coinbase agrees with FinCEN’s view that regulation of this breadth can only benefit from more public participation in its development.
A few days after FinCEN reopened the comment period, President Biden took office and instructed agencies to suspend all pending regulations, including the regulations. see Ronald A. Klain, memo. For executives and agency heads, the regulatory agency freezes pending review (January 20, 2021).Specifically, the memorandum instructs the agency to “immediately withdraw” rulemaking, including the notice of proposed rulemaking here and the open comment period: “Regarding rules that have been sent to OFR but not published in OFR Federal Register, The person in charge of the department or agency designated or designated by President Biden immediately withdrew it from OFR for review.When referring to “rules”, it clearly includes “any substantive actions of the agency (usually published in Federal Register) The promulgation or expectation will result in the promulgation of final rules or regulations, including… notices regarding the development of proposed regulations. ” ID.
President Biden’s nominee for the Secretary of the Treasury, Janet Yellen, has also publicly confirmed to Congress that this particular rule-making should and will undergo a “comprehensive and substantive review”: “I know that FinCEN will be in 2020 How the “Bank Secrecy Law” proposed in December 2008 will deal with certain digital assets. I agree that it is necessary to ensure full consultation with stakeholders and seek their opinions[.] If confirmed, I intend to ensure a comprehensive and substantive review of the proposal, including an assessment of how to ensure that stakeholders provide appropriate comments. “The Finance Committee records the issue, the hearing regarding the nomination of Dr. Janet Yellen, at the age of 88 (January 21, 2021).
As of the date of this letter, the comment period is still open, and it is pointed out that there are only a few days left in the comment period. This is likely to cause great confusion as to whether or not a comment should actually be posted, thereby preventing the public participation that FinCEN should seek during this new comment period. In fact, industry publications have reported that rulemaking has been “frozen” due to the “Executive Order.” See, for example, “Proposed rules for crypto wallets frozen by Biden pending review”, Coindesk, January 20, 2021, https://www.coindesk.com/crypto-wallet-rule-among-those-frozen-by -biden-comment.
Therefore, Coinbase sent a letter requesting FinCEN to formally close the open comment period and “withdraw” the notice of the proposed rule based on the instructions of the new government, and inform the public that there is no comment as soon as possible.
The suspension of current regulations under the guidance of the White House is also consistent with Congress’s recent directive to the Treasury Department in the 2020 Anti-Money Laundering Act. The 2020 Anti-Money Laundering Act is a new power cited by the Ministry of Finance to extend the comment period to support the development of proposed regulations. see AMLA§6204-5. The bill came into effect on January 1, 2021, requiring the Ministry of Finance to review and report to Congress whether any aspect of the existing reporting requirements related to currency transaction reports (CTR) and suspicious activity reports (SAR) should be changed to “reduce Necessary losses”. Onerous regulatory requirements, and to ensure that the information provided achieves a “highly useful” purpose. ID. ; 31 USC§5311, amended by AMLA§6101(a). These reports are critical to the current proposed rulemaking, and their usefulness is a topic that attracted widespread public attention during the first comment period. Any new CTR regulations related to cryptocurrencies will benefit from the reasonable analysis and conclusions of this congressional authorized review. The required regulatory suspension gives FinCEN an opportunity to do so.
During the regulatory suspension, Coinbase will welcome the opportunity to have direct contact with FinCEN on these topics. Coinbase also proposes to assist in coordinating industry or public participation meetings with FinCEN. This may include informal feedback meetings with representatives of the Ministry of Finance, similar to what happens when the Ministry of Finance considers the development of proposed rules for client due diligence. see Financial institution customer due diligence requirements, Federal Reserve 77 Reg. 13,046 (March 5, 2012).
However, if FinCEN does not intend to suspend the current comment period despite the instructions of the White House, Coinbase will respectfully request a formal public statement explaining the decision so that the public knows that there are still comments. At a minimum, the open 15-day comment period associated with the CTR proposal should be merged into a longer planned 45-day comment period for counterparties and record keeping requirements. see Requirements for certain transactions involving convertible virtual currencies or digital assets, Fed 86. Reg. 3897 (January 15, 2021). As far as the current situation is concerned, the current 15-day consultation period is too short to solve major safety, effectiveness, cost and implementation issues. In the absence of substantial duplication of work, there is no real way to divide the required analysis between the two areas of the proposed rulemaking.
Thanks again to FinCEN for willingness to further involve the public in these important topics. Coinbase agrees with Nominee Yellen’s view that the United States needs “a regulatory framework that promotes the development of innovative and promising new technologies while addressing reasonable concerns.” The Treasury Committee records issues, regarding Dr. Janet Yellen’s Nomination hearing, 87 years old (January 21, 2021).
Chief Legal Officer
Cc: Robert S. Fairweather, Acting Director, Office of Management and Budget
After Biden White House’s guidance to the institution, Coinbase asked FinCEN to suspend the development of the rules, which were originally published on the Coinbase blog on Medium, where people continued the conversation by highlighting and responding to the story.