U.S. Senator Pat Tumi urged Secretary of the Treasury Janet Yellen to make “significant changes” to the encryption regulations proposed by the Financial Crimes Enforcement Network (FinCEN) and plans to adopt the guidelines issued by the Financial Action Task Force (FATF).

Senator asks Janet Yellen to amend proposed U.S. encryption regulations

U.S. Senator Pat Tumi wrote to Treasury Secretary Janet Yellen on Thursday about how the U.S. regulates cryptocurrencies. “I am writing to express my concern about two proposals related to the regulation and supervision of cryptocurrencies involving the Ministry of Finance,” he began.

The first question is related to the cryptocurrency trading rules proposed by FinCEN, and the second is related to the FATF’s guidelines on cryptocurrency and virtual asset service providers (VASP). Senator description:

Although I admit that the FinCEN and FATF proposals are seeking to solve the problem of the abuse of cryptocurrencies for illegal activities, if adopted, they will have an adverse impact on financial technology (fintech), the basic privacy of Americans, and efforts to combat illegal activities. I urge you to make significant changes to them.

The senator explained in the first part of the letter that “promoting financial innovation is very important for the United States.” He believes that “cryptocurrency will greatly improve consumers’ privacy, access to financial services, and the power to make decisions for themselves.”

Toomey subsequently asserted that the encryption rules proposed by FinCEN “will have a negative impact on the United States” for two reasons. First, it will impose “heavy record keeping” and reporting requirements on encrypted transactions that “exceed existing dollar transaction requirements.” Second, he argued:

FinCEN’s proposed rules may also prove to be counterproductive in combating illegal activities… By limiting personal privacy and the ability to conduct transactions with financial institutions, the rules may encourage bad actors to use methods that do not interact with financial institutions.

“As a result, such cryptocurrency transactions are not susceptible to proper government supervision and testing,” he continued.

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The senator then pointed out that some reporting requirements for dollar transactions have not been updated for more than 40 years. “The existing requirements for the U.S. dollar are no longer suitable for identifying illegal activities,” he believes, and urged Treasury Secretary Yellen to check whether they are “suitable for U.S. dollar transactions.” He emphasized that in some cases, cryptocurrencies are “easier to track than transactions using U.S. dollars.”

Turning his attention to the FATF guidelines, Senator Toomey asserted:

FATF’s guidelines will push cryptocurrency transactions away from financial institutions and weaken the ability of law enforcement and analysis companies to identify and track illegal activities. The FATF should revise its guidance to focus on transactions and entities that need to be regulated.

The senator concluded his letter to Yellen that the United States “should support rather than curb financial innovation” and added: “I urge you to take a more deliberate approach to identifying illegal activities so that financial innovation can flourish. There is still respect for American privacy.”

Do you think Treasury Secretary Yellen will listen to Senator Tumney’s advice? Let us know in the comments section below.

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