Conversation

SBF
@SBF_FTX
Replying to
@SBF_FTX
4) "Has FinCEN struck a reasonable balance between financial inclusion and consumer privacy and the importance of preventing terrorism financing, money laundering, and other illicit financial activity? If not, what would be a more appropriate way to balance these objectives?"
1
19
SBF
@SBF_FTX
5) Which means, above all: they're _trying_ to be reasonable. That's what's most important.
1
19
SBF
@SBF_FTX
6) So, did they succeed? I'm not sure, because I'm not sure on some of the details. Here are the biggest open questions. Can others tell what the intention is?
3
15
SBF
@SBF_FTX
7) As far as I can tell, this would only apply to a US financial institution sending to a self-custodied wallet. However, offshore ones would need to have some reasonable AML system or sending to them would require this too. Is that true?
3
25
SBF
@SBF_FTX
8) Second, how does a relevant institution know whether a person is sending to an MSB, or metamask? And if it is metamask, how does the MSB verify that it's the user's? It says KYC is needed--but is that KYC of the sender? How do you KYC a metamask wallet?
2
22
SBF
@SBF_FTX
9) There's one reading of this where really nothing is new: it's just saying that if you're sending > $3k-$10k from an exchange, the exchange needs to KYC you (but maybe not if you're sending to another whitelisted business).
1
16
SBF
@SBF_FTX
10) There's another, though, where you would need to verify the identity of the self-hosted wallet. Is that just asking the user if it's theirs, and making them check a box confirming? If not how would you do it?
2
19
SBF
@SBF_FTX
11) Also, does this mean that even if Coinbase knows that a transfer is to someone's cold wallet and has fully KYCed them, they have to file a gov't report with every single transfer above $10k? That's a lot!
1
16
SBF
@SBF_FTX
12) The actual record requirement is much less onerous: any exchange with KYC already has records of all customer information, deposits, withdrawals, etc. The reporting requirement, though, is new.
1
14
SBF
@SBF_FTX
13) So, overall, my suggestions to FinCEN here would be: a) clarify the above! b) I don't think the gov't report part of this makes sense in context: it'll be totally spammed by people moving between metamask and coinbase. Save that for suspicious transactions.
1
26
SBF
@SBF_FTX
Replying to
@SBF_FTX
15) Overall I still feel pretty uncertain about some pieces of this, but I'm heartened by the tone that FinCEN is taking here.
1
22
SBF
@SBF_FTX
16) And, finally, I'd recommend a trial phase-in period so that businesses and regulators can both get used to the system and iron out the details in a way that makes sense; 2 weeks isn't very much time for a system this detailed and complex.
7
45
Show more replies