Payments provider Square has spoken out against a recent Financial Crimes Enforcement Network (FinCEN) rule that would require cryptocurrency service providers to keep more detailed records on bitcoin transactions as opposed to most other kinds of cash transactions.
Square says its current methods of leveraging blockchain tracing with the wallet addresses has been effective thus far, working to track unlawful activity and resulting in convictions and arrests.
But FinCEN’s new requirements would instead make it so there’s a static requirement for companies to collect names and physical addresses from users who aren’t enrolled with the institution allowing the transfers.
In a press release from the Treasury Department, the new rules are touted as ways to “protect national security and aid law enforcement by increasing transparency in digital currencies and closing loopholes that malignant actors may exploit.”
That, according to Square, will result in “unnecessary friction and perverse incentives” that will force crypto customers to go to unregulated sources to make transactions.
“By adding hurdles that push more transactions away from regulated entities like Square into non-custodial wallets and foreign jurisdictions, FinCEN will actually have less visibility into the universe of cryptocurrency transactions than it has today,” the post from Square CEO Jack Dorsey says.
The new proposal would have the effect of restricting law enforcement capabilities, Square says, and also curbing American innovation “by hindering our ability to create a competitive service that allows customers to seamlessly transfer and transact in cryptocurrency the way the technology was designed,” the post says.
The post goes on to call the proposed information-collection process “burdensome” and says it will prevent crypto companies from becoming more competitive.
“This is a critical moment in the development of cryptocurrencies and the associated regulations that govern their use,” the post says. “Delays in modernizing old regulations, or issuance of new regulations that are not risk-based and where the implementation fails to account for the incentives created, creates a drag on innovation, economic growth, and American competitiveness.”
Square announced last October that it was buying $50 million in bitcoin, for around 4,709 bitcoins. Chief financial officer Amrita Ahuja said the company believed bitcoin would become “more ubiquitous” in the future.