Coinbase responds to Treasury regulation proposal: Public feedback period too short, feels rushed.

Recently, the U.S. Department of the Treasury's plan to include non-custodial wallets in the travel rule has sparked controversy. Coinbase, which was the first to disclose this news, has once again responded to the proposal, stating that it significantly shortens the feedback period for the public, which does not comply with regulations, and emphasizes that it should align with the typical regulatory process of 30 to 60 days.

Rumors of Regulation Come True

Earlier reports indicated that the Federal Reserve and the Financial Crimes Enforcement Network (FinCEN) proposed as early as October 23 to apply the Travel Rule regulations to cryptocurrencies. This would require Virtual Asset Service Providers (VASPs), such as exchanges, to collect and share information about both the sender and the recipient.

This is similar to the Bank Secrecy Act that traditional financial institutions comply with, where specific transactions and suspicious users must share information with regulatory authorities.

For cryptocurrency exchanges, if the proposal is passed, they will have to verify the names and addresses of owners for transactions exceeding $3,000 to non-custodial wallets and report to FinCEN for deposits and withdrawals over $10,000.

This undoubtedly imposes various restrictions and inconveniences on regular users. At the time, the CEO of Coinbase described this bill as "unrealistic," "stifling innovation," and "terrifying regulation."

Accelerated Timeline Rushed to Implementation

FinCEN's move has already caused dissatisfaction among many cryptocurrency operators who believe that regulating non-custodial wallets will cut off user interaction with cryptocurrency regulatory authorities and exclude the U.S. crypto industry from global financial innovation.

Despite efforts from many industry insiders, including Coinbase, who have written to the Treasury Department to try to reverse the situation, according to the regulatory announcement released by FinCEN on December 18, the regulatory agency not only made no concessions but also shortened the feedback period from a maximum of 60 days to less than 15 days, completely disregarding the upcoming Christmas holiday.

In response, Coinbase's Chief Legal Officer, Paul Grewal, wrote to FinCEN Director Kenneth Blanco:

We have always had a good working relationship with FinCEN. However, FinCEN's request to provide feedback on the proposal within 15 days, ignoring the COVID-19 pandemic and the Christmas holiday, is too rushed. Such an important regulatory proposal should adhere to the 60 days traditionally required for the process.

In addition to the short feedback period, Paul Grewal also pointed out that FinCEN is passing on the massive cost estimation work to operators, including additional identity verification, related tracking of crypto transactions, balancing user privacy rights, and data transfer costs.

Grewal believes that the regulatory agency fails to recognize the differences between the crypto industry and traditional finance. This hasty proposal is not due to any emergency but merely an attempt by the authorities, specifically current Treasury Secretary Steven Mnuchin, to rush the regulation through without public feedback.

Current Treasury Secretary Steven Mnuchin, on Twitter, stated that this move would enhance transparency to assist law enforcement and help protect national security.