The U.S. Treasury Department has officially withdrawn a 2020 proposal to impose know-your-customer (KYC) requirements on noncustodial crypto wallets, as Nikhilesh De reported for CoinDesk. The move, finalized on Aug. 19, ends a years-long debate that began in the final days of the Trump administration.
In December 2020, the Financial Crimes Enforcement Network (FinCEN), under then-Treasury Secretary Steven Mnuchin, introduced a rule to extend KYC regulations to non-custodial wallets, meaning wallets managed directly by individuals without third-party intermediaries. According to CoinDesk, the proposal was met with immediate and broad opposition from the U.S. cryptocurrency industry, with critics saying the rule was both technically unworkable and excessively vague.
CoinDesk notes that thousands of comments were submitted in response to the proposal, with input from industry leaders, lawmakers, and legal experts. They pointed out that non-custodial wallets do not collect personal information, making compliance with KYC regulations difficult or impossible. The proposal has been criticized for being out of step with the decentralized nature of blockchain technology.
As CoinDesk noted, the transition to the Biden administration in January 2021 significantly reduced the proposal’s momentum. The extended comment period allowed for more scrutiny, and the rule was gradually shelved, culminating in its official withdrawal this month.
Michael Mosier, former acting director of FinCEN, told CoinDesk that the decision to withdraw the rule reflects a growing recognition within the government of the need to adapt regulatory approaches to modern technologies rather than relying on outdated frameworks.
CoinDesk also notes that another 2020 proposal, known as the Travel Rule, is still under consideration. That rule would require financial institutions to report personal information for transactions over $250, much less than the current $3,000 threshold. The future of that proposal remains uncertain.
