1/20 Here's a deep dive on what's really going on, including the behind the scenes, with the Treasury FinCen proposed rule on "unhosted wallets" and new record-keeping and reporting rules. Hang on to your hat.

2/20 This specific effort has been a personal mission for Secretary Mnuchin for multiple years. His own view is far more aggressive than the proposed rule put forward.

3/20 His original plan was to just drop this as a final rule with zero notice for public comment, as a "midnight rulemaking" on his way out of office. This actually didn't have broad support, in fact very few people were even aware of this plan.

4/20 As people got word, an intense amount of work went on behind the scenes to try to at least get this for a standard notice and public review.

5/20 His excuse for not wanting a public review was that public notice would allow the "bad guys" to quickly move their funds off of regulated exchanges. The real reason is January 20th and the end of his term.

6/20 There is NOT broad based support for this from major agencies inside the government, who have a strong and collaborative relationship with industry and would rather see rules developed in an appropriately engaged manner.

7/20 The other excuse for not having extensive industry review, as noted in the document, is that Treasury and Mnuchin already met with industry. Yeah, like an hour meeting in 2019 and an hour in 2020. Big frickin deal. That's not engagement and review.

8/20 The biggest issue here is first and foremost that 15 days over the holidays is totally inadequate and is just frankly a cynical ploy to jam this through no matter what feedback comes back. This violates the APA, so if it's jammed through, expect a lawsuit for an injunction.

9/20 FinCEN are really positive actors and have a strong relationship with industry. I am certain that they would want to take the proper time to review and iterate on these MAJOR changes to how crypto transactions work, and I look forward to working through this with them.

10/20 Same for DOJ, DEA, DHS, Secret Service, FBI, and others who work closely with industry on the actual hard work of chasing bad actors, using crypto or the traditional financial system. I don't see any of them angling to jam a rule down.

11/20 Beyond the time to review, as it stands now, the rule does introduce some serious issues, and these need to be better understood and worked on, another reason for needing more time. Here are the issues.

12/20 First, the rule introduces the potential for a level of financial surveillance that goes beyond anything that exists with the existing banking system. When a large cash transaction happens in banking, a CTR is filed, but law enforcement can't "track the cash".

13/20 In the world of crypto assets, a report that includes a blockchain address essentially gives law enforcement a data feed that includes identity + blockchain addresses and the ability to monitor, in real-time, all of the that customer's flows. This is without any consent.

14/20 Digital bearer assets with public chains combined with identity is a level of surveillance that does not exist in the existing financial system. This deserves a closer look and it's not clear that just applying CTRs to crypto addresses these risks.

15/20 So we need more clarity -- will CTRs include blockchain addresses, or just name and physical address?

16/20 The second major issue is around what this says about custodial services enabling customers to interact with smart contracts and public protocols, where the 'recipient' or 'sender' is a smart contract, not a person.

17/20 The basic premise that this is purely a 'payment system' misses the much larger point that this is highly innovative markets infrastructure, and this rule doesn't consider what that means.

18/20 There are clearly ways to address the risks that are being discussed here, but it will require industry work to build models for identity attestation that can flow through decentralised protocols, wallets, exchanges, etc.

19/20 Ideally, rather than just drop a rule that is inherently incompatible with the breakthrough innovations made possible by public chains, we'd have time as an industry to work with regulators to think through these issues.

20/20 Key thing now is to apply as much pressure as possible, and litigate if necessary, to ensure the kind of public review, comment and iteration that this critical new economic infrastructure and innovation deserves.