June 10, 2021

Toomey Raises Concern Over Burdensome Cryptocurrency Regulations

Washington, D.C. – U.S. Senate Banking Committee Ranking Member Pat Toomey (R-Pa.) urged the Department of Treasury to significantly revise two recent proposals related to the regulation and oversight of cryptocurrencies.

In a letter to Treasury, Ranking Member Toomey wrote:

“While I recognize that [these] proposals are seeking to address the misuse of cryptocurrencies for illicit activity, if adopted, they would have a detrimental impact on financial technology (“fintech”), the fundamental privacy of Americans, and efforts to combat illicit activity.”

Ranking Member Toomey also espoused cryptocurrencies’ benefits for holder privacy:

“A cryptocurrency connects one person with another through open, public networks—separate from government control or other financial intermediaries. As a result, cryptocurrencies stand to dramatically improve consumers’ privacy, access to financial services, and power to make decisions for themselves.”

In December of 2020, the Financial Crimes Enforcement Network (“FinCEN”) proposed a rule that would impose on cryptocurrency transactions onerous recordkeeping and reporting requirements that extend beyond existing requirements for U.S. dollar transactions. As Ranking Member Toomey pointed out, the rule may actually prove to be counterproductive in combatting illicit activity.

“[FinCEN’s proposed rule] could cause illicit transactions to become less traceable than they otherwise would be. By limiting individual privacy and the ability to transact with financial institutions, the rule would likely push bad actors to utilize methods that do not interface with financial institutions. As a result, such cryptocurrency transactions would be less susceptible to appropriate government oversight and detection.”

Ranking Member Toomey also raised concerns over the Financial Action Task Force’s (“FATF”) draft guidance on cryptocurrencies and Virtual Asset Service Providers (VASPs), which would impose stringent regulatory requirements on cryptocurrency transactions.

“FATF’s guidance will drive cryptocurrency transactions away from financial institutions, undermining the ability of law enforcement and analytics firms to identify and track illicit activity. FATF should revise its guidance to focus on transactions and entities that warrant regulation.”

Senator Toomey concluded by urging Treasury to ensure its approach to cryptocurrency regulation encourages financial innovation and protects Americans’ privacy.

To read the full letter, click here.