WASHINGTON—The Financial Crimes Enforcement Network (FinCEN) is saying that cryptocurrencies will not get an enforcement “pass.”
The Treasury Department has outlined its efforts to police electronic currencies in a letter to Sen. Ron Wyden (D-OR) after the lawmaker asked what the department was doing to ensure that Bitcoin and other cryptocurrencies are not being used by criminals to evade banking regulations, Lexology reported.
Wyden is the ranking member of the Senate Finance Committee. He communicated his concern to the Treasury Department that cryptocurrencies could, among other uses, allow foreign governments to circumvent U.S. economic sanctions.
In its letter to Wyden, the Treasury Department reiterated its stance that cryptocurrency companies and trading organizations must comply with laws designed to combat money laundering and the financing of terrorism. To comply, these companies and organizations must investigate customers and report suspicious transactions to authorities.
While the letter does not go into further detail about what this would mean for established cryptocurrencies or Initial Coin Offerings (ICOs), some observers fear that this could mean that ICOs would be required to perform the same “Know Your Customer” (KYC) due diligence that banks do when customers open bank accounts. It also implies that cryptocurrency companies and organizations may have some obligation to monitor transactions made with their cryptocurrency, Lexology explained.
“But given the anonymous nature of cryptocurrencies, it would be difficult, from a practical perspective, for an ICO to perform the same ‘know your customer’ diligence that a bank does,” Lexology said.