US Treasury walks back crypto surveillance 'travel rule' proposal

The Treasury Department has withdrawn a controversial proposal that would have expanded reporting requirements for cryptocurrency transactions.

On Friday, the Treasury's Financial Crimes Enforcement Network and the Federal Reserve Board of Governors rescinded the "Travel Rule," which was first proposed in 2020 to require financial institutions to collect information on transactions of $250 or more, decreasing that threshold from $3,000. 

In a filing, FinCEN said it was withdrawing the proposed rule because more than five years had passed, the convertible virtual currency industry had changed and additional public input would be helpful.

"The Agencies believe that any future, potential amendments to the Recordkeeping Rule and Travel Rule related to CVC should be considered in light of these recent developments to ensure that such amendments are fit for purpose," FinCEN said.

When the rule was proposed, FinCEN had argued that bad actors were increasingly using smaller transactions to move illicit funds. However, crypto groups, like Coin Center, had warned that lowering the threshold from $3,000 to $250 would mean that more ordinary transactions would be subject to "warrantless financial surveillance." 

In a blog on Friday, Coin Center said it was happy to see the rule proposal rescinded, along with another rule proposal that was withdrawn last month that would have imposed reporting and recordkeeping requirements on transactions involving self-hosted wallets.

"This follows Treasury’s withdrawal last month of the proposed 'unhosted wallet' and cryptocurrency mixing rules, both of which Coin Center had also opposed," the organization said. 'Taken together, these withdrawals close the books on several long-pending proposals that would have expanded the Bank Secrecy Act’s already extensive financial surveillance regime."

"It had not moved forward over the past several years for good reason," he said. "Lowering the threshold from $3,000 to $250 for cross-border transfers would have placed undue burden on institutions."