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US Treasury Department Lacks Power to Pass FinCEN Bill – Coin Center

Last updated: | 2 min read

The controversial draft anti-money laundering/know-your-customer (AML/KYC) crypto compliance regulations proposed by the US Treasury Department and the Financial Crimes Enforcement Network (FinCEN) is continuing to draw criticism from critics, who claim the agency is acting out of its remit in its bid to regulate the sector.

Statue of Albert Gallatin, the fourth Secretary of Treasury, in front of the Department of Treasury building in Washington, D.C. Source: Adobe/Sergey Novikov

The crypto advocacy group Coin Center has published a second open letter to the agency. The new correspondence accuses the regulator of creating further chaos and disregarding public feedback.

The group accused the legislation’s architects of “rushed” and “chaotic” decision-making.

Coin Center wrote,

“January 4 was originally listed as the final day for receiving comments, both on the official notice in the Federal Register as well as the website – that is until they secretly changed it to January 7. To be clear, this isn’t some generous extension, it is simply more chaos stemming from a rushed procedure and palpable disregard for meaningful public feedback.”

The advocacy group said its second comment letter details “the rushed process that has led to this deadline confusion and that shows so much contempt for meaningful public feedback,” and shows that numerous commenters, including prominent speakers, “relied on FinCEN’s misleading public notice to their detriment, receiving effectively only 12 days to comment and not the promised 15.”

Coin Center also made fresh arguments about statutory authority, and claims the Treasury could lack the legal basis from which to promulgate the controversial regulation, hitting out at the way that such a “meager period of time” had been allowed “within this rushed rulemaking process.”

The group wrote, on the matter of legality,

“To quickly review administrative law, the Treasury Department, as a division of the executive branch, is not constitutionally empowered to make laws. We sometimes call the rules that are made by executive agencies ‘laws,’ but they are not laws; they are rules that support and implement the laws that are actually passed by Congress.”

Meanwhile, various crypto industry players have already unveiled their plans to mount a challenge against the regulation in court if the need arises.

Brian Armstrong, the CEO and Co-Founder of American crypto exchange powerhouse Coinbase, said that his company was planning to join the venture firm Andreessen Horowitz in mounting a legal challenge against the regulation if it is accepted. 

Referring to Kathryn Haun, a General Partner at Andreessen Horowitz and the Independent Director at Coinbase, Armstrong tweeted that  as “a former federal prosecutor,” Haun “would not propose challenging this in court unless she felt there was a strong case.”

Armstrong also wrote on Twitter,

“It’s ill-advised and didn’t follow proper procedure. FinCEN should revisit in the new administration, engaging with industry, if it still wants to pursue something in this area. It’s not even clear they should, by the way.”

At the time of writing (14:10 UTC), over 7,100 comments have been submitted on the draft via a dedicated webpage.

Learn more:
Regulatory Kaleidoscope Challenges Crypto Industry – CCO
Crypto Regulation in 2021: The Piecemeal Approach & New Winds
New Regulatory Lemons Await Somewhere Between DeFi & CeFi
More Crypto Regulation Coming in Russia and Beyond, Warns Key Lawmaker