Amidst the regulatory blitz of President Biden’s first few weeks, the Financial Crimes Enforcement Network (FinCEN) quietly took further steps to regulate cryptocurrencies. While the White House was busy freezing all other pending rules, FinCEN was moving forward with the extension of a new rule that would require banks and money services businesses (MSB’s) to record and disclose the identities of individuals involved in crypto transactions. Although the proposed rule only targets transactions over $10,000, it nevertheless represents an existential threat to cryptocurrencies as we know them, and has prompted outrage from the crypto community.
In order to understand the magnitude of this regulatory change, it is useful to have an understanding of cryptocurrencies and the mechanics that underlie them. In the simplest terms, cryptocurrencies are a decentralized, virtual alternative to traditional currencies like the dollar that are controlled by central banks. Using crypto, individuals can store value and transact anonymously outside of government controls. In general, all of this is backed by a publicly distributed ledger of transactions typically held in a blockchain. Because the public ledger is both decentralized and anonymized, cryptocurrencies are an incredibly secure means of transacting digitally.
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