Jack Dorsey warns that FinCEN regulations will drive crypto users offshore

Major U.S crypto firms are united in opposition to new AML laws proposed by FinCEN, warning they could drive users away from regulated platforms and stifle innovation.

Major U.S crypto firms are rallying against FinCEN’s proposed regulations that would force businesses operating with crypto to gather information on the identities of non-customer counterparties.

A Jan. 4 letter from Jack Dorsey, CEO of financial services firm Square takes aim at the proposal for seeking to impose reporting obligations that go “far beyond what is required for cash transactions,” and that Sqaure would be expected to collect “unreliable data about people who have not opted into our service or signed up as our customers.”

“Counterparty name and address collection/reporting should not be required for [virtual currency] CTRs or recordkeeping, as it’s not required for cash today.”

Square predicts that if passed, the law would drive cryptocurrency users toward unregulated and non-custodial crypto services based outside of the U.S. — impacting the nation’s global competitiveness and creating further challenges for regulators:

“By adding hurdles that push more transactions away from regulated entities like Square into non-custodial wallets and foreign jurisdictions, FinCEN will actually have less visibility into the universe of cryptocurrency transactions than it has today.”

FinCEN has received widespread criticism for its proposed rule change, with the regulator offering only 15 days rather than the usual 60 days for public comment after publishing the proposal on Dec. 18. Despite such, nearly 6,000 comments have been submitted to FinCEN on the matter.

Major U.S.-based crypto exchange Kraken was among those criticizing the proposed regulations, slamming FinCEN for failing to provide estimates for the cost of implementing the rule. Like Square it warned that the law will drive users away from regulated platforms.

“It virtually guarantees that the evidence available to law enforcement today will be placed outside their reach tomorrow,” Kraken concluded, adding:

“It is quite clearly a politically-motivated piece of midnight rulemaking, the publication of which diminishes the trust we have placed in FinCEN.”

Coinbase published a submission taking exemption to FinCEN’s proposal, describing the rule as “impermissibly vague,” suggesting that it imposed “expansive privacy invasions on the public,” and adding that it failed to offer a public benefit.