FinCEN and FATF Proposed Rules are ‘OverKill’, Says a Top Ranking Republican

In a letter to Secretary Janet Yellen, Senator Pat Toomey (R) highlighted concerns related to the proposed regulations by FinCEN and FATF that will not address illicit activities but will negatively impact the United States.

Counterproductive Rules 

In a passionate plea to Janet Yellen on June 10, the current Treasury Secretary, Senator Pat Toomey of Pennsylvania, described the proposed regulations by FinCEN (Financial Crimes Enforcement Network) to be an ‘overkill.’ He considerers it an overstep to impose conditions that do not apply to U.S. dollar transactions. 

The new requirements from FinCen mandate financial institutions to collect information even when it is not provided to them or readily obtainable. Toomey raised concerns about how the personal information of individuals who are not customers of financial institutions will be collected and reported to the authorities. His comments come in contrast to Sen. Elizabeth Warren’s recently misguided comments. The Quaker State Senator has made individual privacy a highlight in the overreach of the network. 

Pat Tooomey, junior Senator of Pennsylvania: Source

The proposed provision, which was drafted during the previous Presidential administration, requires any crypto exchanges or financial institutions to keep the name and physical address information for transactions above $3,000 and file reports for transactions above $10,000. 

Toomey expressed further concerns for the onerous record-keeping requirement that is imposed for cryptocurrency transactions that do not exist for U.S. dollar transactions. The main purpose of the proposed regulations to combat illicit activities would not be achieved through this decision. What is not considered is how this will drive cryptocurrency transactions away from financial institutions. Ultimately, this will make identifying and tracking illicit activities even tougher. 


Disparity in Treatment

The Senator’s primary concerns are the overbearing provisions that can be crippling to any crypto exchanges or financial institutions and privacy rights. The entire exercise would more understandable if the same treatment is applied to dollar transactions. Equally exposed to being used for illicit purposes, there should be no demarcation between rules imposed on cryptocurrency for the dollar currency. The treatment accorded should be similar. 

He also highlighted that the role of government is to support and not inhibit financial innovation. When speaking about crypto he said that ‘…this technological breakthrough has the potential to dramatically empower individuals and improve their lives.’

Identifying the explosive role that cryptocurrencies play in FinTech, consumers enjoy better privacy, greater access to financial services, and are empowered to make decisions for themselves. The government should not stand in the way of innovative technologies in favor of antiquated customs. 


Timely Call for Reflection 

The clarion call could not be more timely. The major players in the crypto industry have recognized––and are in consensus––that a clear regulatory regime is necessary to prevent illicit activities. However, overregulation will be counterproductive. Regulators in the United States have been making more threats on how regulations will come down strongly on ‘bad actors’ but have not expressed their willingness to understand and support this breakthrough innovation. 

Numerous voices across the US have called for regulation, notably:

February 11, 2021 – Secretary Janet Yellen called cryptocurrencies such as Bitcoin a ‘growing problem’

May 6, 2021 – Securities and Exchange Commission (SEC) said that cryptocurrency exchanges need direct regulation

May 20, 2021 – U.S. Treasury Department called for stricter cryptocurrency compliance with the IRS

May 21, 2021 – the Chairman of the Securities and Exchange Commission (SEC), Gary Gensler issued a warning to ‘bad actors’ in crypto.  

Time to Support Innovation and Empower the People

In the short lifespan of Bitcoin and crypto, we have seen the potential of a disruptive technology. The disruption is not detrimental if you stand on the side of the people. It is an innovation that brings opportunities and empowerment. Prior attempts to ignore this were unsuccessful and have now progressed to attempts of overregulation of this new technology. The obligations imposed on financial institutions to inspect each cryptocurrency transaction with a fine-tooth comb could expose other vulnerabilities in the financial system. The overzealous attempt of regulating a new industry will not bode well.

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