- The financial crimes unit of the US Department of the Treasury is pursuing new regulation that would place a higher burden on cryptocurrency exchanges like Coinbase to record details about their customers.
- Monday was the last day for public comment on the proposed rulemaking, and VCs wrote scathing letters, condemning the Treasury for trying to rush regulation before President Donald Trump leaves office.
- Crypto exchanges and their investors are furious that the financial crimes unit, or FinCEN, shortened the public comment period from the typical 30 to 60 days to just 15 days, and over the holidays.
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Venture capitalists are blasting the federal government for trying to jam new cryptocurrency regulations into place during President Donald Trump's last days in office.
Late on the Friday before Christmas, the Treasury Department's financial crimes unit, FinCEN, published a draft version of new rules that would require companies to collect the names and addresses of people if they make crypto transactions over $3,000. The goal, it said, is to stop money laundering and help law enforcement track down bad actors.
Then Treasury officials gave the public only 15 days to issue comment, even though comment periods are typically 30-60 days, or even longer. That sparked outcries from crypto exchanges and their supporters.
On Monday, legions of tech investors including Andreessen Horowitz's Katie Haun, Fred Wilson, Jack Dorsey, and the Winklevoss brothers publicly filed their comments, criticizing the financial crimes unit for trying to rush through the proposed regulation under the "cloak of the holidays" and "at the eleventh hour of an outgoing administration."
"That is madness and no way to regulate an issue at the very heart of a new open financial system that is poised to open access and massively reduce the cost of financial services for everyone," Wilson wrote on his blog, AVC. One of the great promises of cryptocurrencies is that they can behave like cash, not tied to identities. This rule would undermine that.
Wilson said the regulations would make it harder for exchanges like Coinbase — one of his investments — to provide financial services for the millions of Americans who don't have access to traditional banking. The Treasury Secretary's hurry, he said, provides "a textbook case of how not to regulate important technology innovation."
His firm, Union Square Ventures, filed a joint comment with Ribbit Capital and Paradigm, a crypto-focused venture fund, urging Treasury Secretary Steven Mnuchin to allow more time for experts and stakeholders to weigh in.
Monday was the last day for the public to issue comment on the proposed rulemaking. Coinbase, the largest crypto exchange by trading volume, also published an open letter attacking the "breakneck schedule for a major rule."
And Andreessen Horowitz came out swinging. The venture capital firm has significant interests in how crypto is regulated. It was an early investor in Coinbase, which has filed to go public through an initial public offering sometime this year, and it's raised two venture funds totaling $865 million that are earmarked for investing in crypto assets and businesses.
Haun, a general partner and a former prosecutor who helped bring down corrupt agents on the Silk Road task force, wrote on the firm's blog that the draft regulations would ask crypto exchanges to collect and report detailed and private information about their customers, "a standard applied to no other sector of the financial industry today."
The proposal, she argued, would punish the industry while also sidestepping standard rulemaking procedure.
"We welcome well-reasoned and well-vetted regulation in the crypto space, but trying to squeeze regulatory changes into the tail end of an administration w [sic] no process is a terrible idea," Haun tweeted late Monday.
She called on Mnuchin to kill the proposal, or at least reopen the public comment period so all stakeholders can "meaningfully engage."
If the regulation takes effect as is, Andreessen Horowitz will pursue legal action, she said.
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