Square says new FinCEN wallet proposal will inhibit crypto adoption and hinder law enforcement efforts

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Square is the latest company to go public with its opposition to proposed rulemaking from the U.S. Financial Crimes Enforcement Network (FinCEN).

If enacted, the proposal would require companies to keep records of and report certain cryptocurrency transaction information beyond what is required for cash transactions today. 

Square argues in its letter to FinCEN, published Monday, that the proposal will lead to "unnecessary friction," incentivizing current crypto customers to move away from regulated crypto transaction services and use non-custodial wallets or services outside the U.S. to carry out transactions. 

"FinCEN will actually have less visibility into the universe of cryptocurrency transactions than it has today," the firm said.

Per Square's statement, if the FinCEN proposal is implemented, it will create an "unlevel playing field" that will benefit more traditional financial institutions. Companies like Square will be required to keep more detailed records of transactions over $3000, as well as filing currency transaction reporting (CTR) to FinCEN for transactions above $10,000. According to the statement, this will compromise customer privacy and further inhibit the widespread adoption of cryptocurrencies. 

"To put it plainly — were the Proposal to be implemented as written, Square would be required to collect unreliable data about people who have not opted into our service or signed up as our customers," the company said.

In addition to this, Square contends that the FinCEN proposal will not help current law enforcement efforts, and could in fact hinder them by driving crypto customers away from regulated transaction services and towards unregulated, opaque channels. 

"This Proposal will inhibit financial inclusion, present practical problems, is arbitrary and unduly burdensome, and will drive innovation and jobs outside of the U.S. and regulated institutions," the firm wrote in its letter. "We believe the work that industry and law enforcement have done and continue to do together has been effective and should be supported and strengthened."

The proposal was officially registered on December 23 with a 15-day public comment period. Coinbase, among other parties, has asked FinCEN to extend this period to allow for more public input. Square's submission comes on the deadline for submissions, January 4. 

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