FinCEN Proposes Sweeping Crypto Privacy Crackdown, Felix Shipkevich Weighs In

Felix Shipkevich was recently interviewed in a article:

Digging deeper into the topic, Kitco Crypto had a conversation with Felix Shipkevich, a fintech regulatory attorney and Special Professor of Law at Hofstra Law School.

Shipkevich started the conversation by saying, “I give a lot of credit to FinCEN for being a very intelligent and ahead-of-its-time federal agency in proposing these types of rules that are significantly ahead of other federal agencies.”

“We typically have a reactionary, regulatory framework, and while this is somewhat reactionary to what happened in the Middle East, the speed with which this came out, with substance and very thoughtful intelligence analysis, is really positive in my view,” he said.

Shipkevich acknowledged that FinCEN was likely working on the proposal for a while due to the Treasury Department’s sanctioning of the crypto mixer Tornado Cash in August 2022, and said “the recent events in the Middle East propelled the time of this.”

“But I’m incredibly positively surprised on how detailed some of the wording is when it comes to mixing and some of the language considering mixing of CVCs and how terrorists try to avoid detection through the use of Omnibus accounts,” he said. “Clearly, this is just the first step in many that FinCEN will take in trying to prevent fraud.”

“I’m hoping that this will not be a controversial proposal,” he said. “It’s great to see this from both an academic and practitioner point of view.”

When asked what types of ramifications the proposal would have on the crypto ecosystem if passed, Shipkevich said the effects would be substantial.

“It will have a pretty significant impact on the U. S., those who do business in the U.S., or those that are regulated to do business in the U.S. as covered institutions,” he said. “As long as you fall within the definition of a covered institution, this proposal affects you.”

He said questions remain around the reporting requirements proposed, “such as the amount of the convertible virtual currency [CVC] and its equivalent, the dollar equivalent, and the CVC mix reviews,” because it is unclear if the covered institutions will actually have access to this information.

“I wonder if some of the comments will cover whether the covered institution will actually have access to some of this information, whether they’ll know what CVC mixer was used, and what wallet addresses are used,” he said. “That’s to be determined. And I’m curious to see whether some of the commentaries will actually include comments that discuss whether that’s even possible.”

“But it’s a pretty significant impact on covered institutions and financial institutions doing business in the U.S.,” he said. “It’s a major step to prevent money laundering from U.S.-based covered institutions, who are subject to certain reporting requirements.”

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