U.S. Treasury Secretary states stronger crypto rules coming to strengthen transparency, arm law enforcement to prevent laundering

The Skinny:

  • U.S. Treasury Secretary Mnuchin says ‘significant’ new AML requirements coming for crypto.
  • U.S. wants to increase transparency of crypto transactions, better arm law enforcement to investigate when laundering goes digital.
  • Stronger rules, top regulatory official calling crypto ‘burning pile of garbage’ could hamper torrid Bitcoin value surge.

By Brian Monroe
bmonroe@acfcs.org
February 13, 2020

The chief of the U.S. Treasury stated the office, in collaboration with the country’s financial intelligence unit, will soon be rolling out “significant new requirements” for financial crime compliance in the cryptocurrency sector.

That issue was just one of many lawmakers queried U.S. Treasury Secretary Steven Mnuchin in a contentious Senate Finance Committee hearing Wednesday, ostensibly to discuss the President’s Fiscal Year 2021 Budget, but also covered several critical areas of financial crime and compliance, including cryptocurrencies, anonymous shell corporations, money laundering and sanctions evasion.

The statements by Mnuchin build on recent efforts by the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) and the Paris-based Financial Action Task Force (FATF) to craft more concrete domestic and international anti-money laundering (AML) obligations for the burgeoning and ever-spasmodic crypto sector.

In response to a question about how the Treasury will spend budget dollars to counter criminals maneuvering through virtual worlds, Mnuchin stated that “specifically on cryptocurrencies. We are spending a lot of time on this on both an interagency basis and with the regulators.”

“We’re about to roll out some significant new requirements at FinCEN,” he said. “We want to make sure that technology moves forward, but on the other hand we want to make sure that cryptocurrencies aren’t used for the equivalent of old Swiss secret number bank accounts. We share your concern and you’ll be seeing a lot of work coming out very quickly.”

In a second response on this subject, Mnuchin added that: “We are working with FinCEN, and we will be rolling out new regulations to be very clear on greater transparency so that law enforcement can see where the money is going and that this isn’t used for money laundering.”

In a second response on this subject, Mnuchin added that: “We are working with FinCEN, and we will be rolling out new regulations to be very clear on greater transparency so that law enforcement can see where the money is going and that this isn’t used for money laundering.”

 

"We’re about to roll out some significant new requirements at FinCEN," covering crypto fincrime compliance. - 
U.S. Treasury Secretary Steven Mnuchin
Designer

Crypto space a ‘dumpster fire’

Another federal official took an even more negative view of the crypto sector’s future.

The president of the Federal Reserve Bank of Minneapolis, Neel Kashkari, said on Tuesday that bitcoin and other cryptocurrencies are “like a giant garbage dumpster,” according to Bitcoin.com.

He stated he would choose that his one-year-old daughter should have a low yielding Treasury bond rather than invest in bitcoin, emphasizing that all that’s emerging from the crypto world “is burning garbage,” adding that people are being fleeced by the billions of dollars by engaging the nascent sector.

Last year, at the peak of 2019’s crypto mania when Bitcoin was trading up 300% in four months, Mnuchin gave similar sentiments about an impending crackdown  on the crypto industry, according to Blockonomi.

After stating that cryptocurrencies pose a “risk to the financial system” and a “national security issue” if they are used like nigh anonymous Swiss bank accounts – President Obama likened Bitcoin to a digital Swiss bank account – Mnuchin said that there will be a concerted effort to improve oversight, enforcement and investigations tied to digital assets, according to Blockonomi.

“We’re going to make sure we have a unified approach and my guess is that there are going to be more regulations that come out from all these agencies,” he said at the time.

More criminals turning to crypto

As reported by Blockonomi previously, this pledge for an industry crackdown comes as data has confirmed that criminals remain enamored with Bitcoin and other cryptocurrencies as a means of transaction.

In Chainalysis’ latest report, the blockchain analysis firm found that the value of cryptocurrency spent on dark web markets, where individuals can buy items like fake identification and drugs, surged 60 percent to a “new high” of $601 million in Q4 of 2019.

Chainalysis added that 1 percent of Bitcoin transactions are used for illicit activity — up from the approximately 0.5 percent seen in the year prior, (via Congress, the Senate Finance Committee). To read a transcript of the hearing, click here.

Monroe’s Musings: The impending rules, along with a technical challenge to capture and share data on the users of crypto coins with related exchanges – called the “Travel Rule” – and statements from influential government policy makers that the virtual asset space is akin to a “burning pile of garbage” could temper some of the current industry jubilation with the value of Bitcoin surging recently to more than $10,000, up some 40 percent so far this year.