FinCEN Proposes KYC Requirements for Digital Wallets

​The Financial Crimes Enforcement Network (FinCEN), a bureau within the U.S. Department of the Treasury, has released a proposed rule that would require banks and money services businesses (MSBs) to submit reports, keep records, and verify the identity of customers for certain transactions involving convertible virtual currency (CVC) or digital assets with legal tender status (LTDA).

According to FinCEN, the proposed rule would only apply if users want to send amounts greater than $10,000 in a single day, complementing existing BSA requirements applicable to banks and MSBs.

Furthermore, banks and MSBs will have 15 days from the date on which a reportable transaction occurs to file a report with FinCEN.

The proposed rule would also require banks and MSBs to keep records of a customer's CVC or LTDA transactions and counterparties, including verifying the identity of their customers, if a counterparty uses an unhosted or otherwise covered wallet and the transaction is greater than $3,000.

“This rule addresses substantial national security concerns in the CVC market, and aims to close the gaps that malign actors seek to exploit in the recordkeeping and reporting regime,” said Secretary Steven T. Mnuchin. “The rule, which applies to financial institutions and is consistent with existing requirements, is intended to protect national security, assist law enforcement, and increase transparency while minimizing impact on responsible innovation.”