With criminals increasingly turning to virtual currencies to move illicit funds, the Financial Crimes Enforcement Network last week proposed new requirements for certain transactions involving convertible virtual currency or digital assets with legal tender status. Under the rule, banks would be required to submit reports, keep records and verify the identity of customers in relation to transactions involving these types of assets that are held in both “hosted” wallets—those held at a financial institution—as well as in “unhosted” wallets, which are not hosted by a third-party financial institution.
Banks would be required to file a report to FinCEN with certain information related to a CVD or LTDA transaction and counterparty, and to verify the identity of their customer, if a counterparty to the transaction is using an unhosted or otherwise covered wallet and the transaction is greater than $10,000. Banks would also be required to keep records of a customer’s CVC or LTDA transaction and counterparty—including verifying the identity of their customer—if a counterparty is using an unhosted or otherwise covered wallet and the transaction is greater than $3,000.
FinCEN noted that the proposal does not modify the regulatory definition of “monetary instruments” or otherwise alter existing Bank Secrecy Act regulatory requirements applicable to monetary instruments. Comments on the proposal are due Jan. 4.