Public consultation period ends, non-custodial wallet regulation fears may come true, a16z partners with Coinbase: Will meet in court if approved

The United States' plan to include non-custodial wallets in the Anti-Money Laundering travel rule has sparked significant controversy. The draft consultation period is only 15 days and spans the Christmas holiday, leaving many industry professionals dissatisfied. As the feedback period ends, Silicon Valley venture capital legend a16z and the CEO of Coinbase have spoken out against it. If the bill is passed, objections will be raised in court.

Major Regulation May Become Reality

According to previous reports, the Federal Reserve and the Financial Crimes Enforcement Network (FinCEN) proposed as early as October 23 to apply the anti-money laundering travel rule to cryptocurrencies. Virtual Asset Service Providers (VASPs), which are cryptocurrency exchanges, would be required to collect and share information about the sender and recipient.

For cryptocurrency exchanges, if the proposal is passed, they would need to verify the name and address of the owner for transactions exceeding $3,000 to non-custodial wallets. Additionally, for transactions exceeding $10,000 in deposits and withdrawals, reports would need to be submitted to FinCEN.

a16z Partner: Using Christmas as a Cover

The originally scheduled public consultation period has ended, and several industry insiders previously wrote to the Treasury Department in an attempt to extend the consultation period but were unsuccessful. As a result, a16z partner Kathryn Haun penned an article criticizing the questionable actions of FinCEN. In her article, she mentioned:

Under the guise of the holiday season, FinCEN is attempting to quickly pass unreviewed regulations, which violates the standard procedures for U.S. regulation. The bill does not apply to sectors outside of traditional finance, and not only does it fail to address the issues, but it also exceeds the scope of the Bank Secrecy Act, violating the Fourth Amendment of the U.S. Constitution.

Kathryn Haun described the bill as arbitrary and capricious, demanding that FinCEN withdraw the proposal or at least extend the public consultation period. She claimed that if the bill is passed, she will join others in objecting in court.

3/ There’s a phrase in the law, “arbitrary and capricious,” & that’s what we think this proposed rule is bc tl;dr

— Kathryn Haun (@katie_haun) January 5, 2021

Coinbase CEO: This Move Will Make the U.S. Lose Its Dominance

Coinbase CEO Brian Armstrong has publicly spoken out multiple times regarding this issue. He was also among the first insiders to release this news on 11/26. He retweeted Kathryn Haun's tweet and expressed his strong agreement, believing that the bill could harm the interests of the American people and cause the U.S. to lose its long-held position as a financial center. He pointed out:

Katie Kathryn Haun makes a good point, as a former federal prosecutor, she would not easily object in court without sufficient reasons. Assuming the bill is passed, Coinbase will appear in court alongside a16z.