By: Ethan G. Ostroff

On August 19, the U.S. Treasury Department officially withdrew a contentious proposal from 2020 that aimed to impose know-your-customer requirements on non-custodial cryptocurrency wallets.

In December 2020, the Financial Crimes Enforcement Network (FinCEN) proposed a rule that, if finalized, would have required banks and money service businesses to submit reports and verify the identity of customers in transactions involving convertible virtual currency or digital assets held by cryptocurrency wallet software. These wallets are managed directly by individuals without third-party intermediaries. The proposal faced widespread opposition from the U.S. crypto industry, which argued that the rule was unfeasible. Critics emphasized that non-custodial wallets do not collect personal information, making compliance with the regulations impossible.