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1/ What does FinCEN's proposed rule mean for DeFi?
And what can *you* do about it?
Check out this excellent panel discussion by @jchervinsky, @KMSmithDC and @colleenklein hosted by the DeFi Alliance.
Summary and thread below
And what can *you* do about it?
Check out this excellent panel discussion by @jchervinsky, @KMSmithDC and @colleenklein hosted by the DeFi Alliance.
Summary and thread below
2/ This rule does not change the definition of MSBs.
It suggests a new compliance obligation to collect info on self-hosted wallets in tx (typically withdrawals) from hosted to self-hosted wallets.
This type of obligation does not exist for traditional cash tx.
It suggests a new compliance obligation to collect info on self-hosted wallets in tx (typically withdrawals) from hosted to self-hosted wallets.
This type of obligation does not exist for traditional cash tx.
3/ The issue for exchanges and other MSBs is i) the level of diligence necessary to collect and verify this info, ii) whether or how this would apply to multisig, DAO or other smart contract addresses where there is no single or verifiable person or entity owner.
4/ Why does this matter?
CEXs serve as important onramps for DeFi.
Coinbase Earn had 174k users supply USDC into Compound.
23k then went on to supply more assets.
Something like this might no longer be possible if this rule is implemented. https://ournetwork.substack.com/p/our-network-issue-49
CEXs serve as important onramps for DeFi.
Coinbase Earn had 174k users supply USDC into Compound.
23k then went on to supply more assets.
Something like this might no longer be possible if this rule is implemented. https://ournetwork.substack.com/p/our-network-issue-49
5/ The ambiguity is also critical.
MSBs may choose to simply derisk and either prevent withdrawals to smart contracts or perhaps even to all self-hosted wallets if they are unclear how to comply or if the burden is too large (derisking is often easier than complying).
MSBs may choose to simply derisk and either prevent withdrawals to smart contracts or perhaps even to all self-hosted wallets if they are unclear how to comply or if the burden is too large (derisking is often easier than complying).
6/ This may further force DeFi-related trading firms, market makers or liquidity providers offshore.
Ambiguity means each individual company will need to spend time and resources behind closed doors trying to figure out if and how to comply.
Ambiguity means each individual company will need to spend time and resources behind closed doors trying to figure out if and how to comply.
7/ Some organizations may choose to simply up and leave the US because this individualized burden is not worth it.
Beyond this, there are privacy concerns of collecting and securely storing all this info.
Beyond this, there are privacy concerns of collecting and securely storing all this info.
8/ Most importantly, this rule is being proposed outside of typical process. The public has been given only 15 days to respond and over the holidays no less.
This means the industry needs to act quickly -- and it is!
This means the industry needs to act quickly -- and it is!
9/ Intense lobbying efforts and potentially even lawsuits are moving forward but that doesn't mean that you as a DeFi user, founder, enthusiast or observer shouldn't get involved.
10/ So what can you do?
Check out Jake's awesome thread and file a public comment now! https://twitter.com/jchervinsky/status/1341847202365366274?s=20
Check out Jake's awesome thread and file a public comment now! https://twitter.com/jchervinsky/status/1341847202365366274?s=20
11/ Send an email via Coin Center. https://coincenter.good.do/fincen/fincen-email/
12/ Or call your local representative.
Better yet, do all of these things -- now!
Better yet, do all of these things -- now!
