Jack Dorsey, CEO of Twitter and Square, is not pleased with the proposed new cryptocurrency legislation. In a letter posted to the firm’s site, he stressed how the legislation would affect Square, a financial services firm.
Square bought $50 million in bitcoin in October. The company has invested extensively in the cryptocurrency system, so Square has a lot of skin in the market. Restrictions create ‘unnecessary complexity and unfair opportunities for cryptocurrency customers to avoid controlled organizations for cryptocurrency transactions,’ writes Dorsey.
The legislation introduced by the Financial Crimes Enforcement Network (FinCEN) would require financial institutions (like Square) to protect personal information on the involved parties in cryptocurrency transactions. You can read a deep-dive here, but the most significant provision is for financial firms to obtain the name and physical address of all participants to any major transaction they are involved in.
The purpose of the legislation is to help deter some of the illicit uses of cryptocurrencies, such as drug trafficking, money laundering and “international terrorist financing,” but Dorsey’s main complaint is they’ll create “unwanted friction” among cryptocurrency users and investment firms, which could lead to “market distortions.”
To use the example included in the text, say a parent uses Square to send $4,000 in bitcoin to their child. Even if the child uses a private bitcoin wallet on her own computer, Square will be obliged to collect her private information, like her physical address. Dorsey, along with other consumer advocates, sees this as an over-reach, especially given the transparent nature of the blockchain.
Dorsey claims that the legislation could end up driving consumers ‘to use non-custodial wallets or platforms outside the U.S. to move their money more easily,’ causing FinCEN to have ‘less exposure in the cryptocurrency environment than it has today.’ Simply put, if people have to provide personal data to a bank in order to make a payment, they would stop using the bank—
What would be more, Dorsey writes, creativity is hampered. “The complex and expensive information collection and reporting requirements deprive U.S. companies like Square of the opportunity to compete in the global field to enable cryptocurrency as a tool for economic emancipation.”
The letter was sent as part of the Regulation’s unusually short consultation period. The normal public consultation period for these forms of legislation is 60 days, but the comment period for this plan is 15 days—many of which were vacations. The Treasury Department’s explanation for this is due to “significant national security imperatives,” although it does not include any more examples.