Treasury and Federal Reserve Withdraw 2020 Proposal to Expand Crypto Financial Surveillance

The U.S. Treasury and the Federal Reserve have withdrawn a 2020 proposal that would have expanded financial surveillance of cryptocurrency transactions. This withdrawal follows previous pullbacks of related regulatory measures impacting digital assets.

The withdrawn rule, jointly proposed by the Financial Crimes Enforcement Network (FinCEN) and the Federal Reserve in October 2020, aimed to lower the threshold for financial institutions to collect and retain information on certain international funds transfers from $3,000 to $250. The proposal also sought to clarify that existing Recordkeeping and Travel Rules apply to transactions involving convertible virtual currency and digital assets with legal tender status.

This action comes after the Treasury’s withdrawal last month of proposed rules concerning ‘unhosted wallets’ and cryptocurrency mixing services, both of which had also faced opposition. Together, these withdrawals indicate a pause in the expansion of the Bank Secrecy Act’s financial surveillance regime.

At the time of the original proposal, Coin Center commented that lowering the threshold would subject a significantly larger number of ordinary transactions to financial surveillance. According to Coin Center, the agencies had not adequately considered the resulting costs to individual privacy. They argued that regulatory analysis should account for the privacy costs imposed on individuals, not just compliance costs for regulated firms. The proposal, they noted, lacked a meaningful assessment of these privacy costs despite expanding the scope of transactions subject to these requirements.

Treasury and the Federal Reserve stated that any similar future proposal would require a new opportunity for public comment. The agencies are withdrawing the current proposal rather than proceeding with the expansion.

Why This Matters

The materials describe a narrow update: The Treasury and the Federal Reserve have withdrawn a proposed rule from October 2020 that would have lowered the threshold for financial institutions to collect and retain information on certain international funds transfers from $3,000 to $250. The withdrawals close the books on several long-pending proposals that would have expanded the Bank Secrecy Act’s already extensive financial surveillance regime.

Broader Context

Source materials place the factual news in this context: Treasury and the Federal Reserve are withdrawing another long-pending rulemaking that would have expanded financial surveillance of cryptocurrency users.