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Coinbase seeks extended feedback deadline to FinCEN’s new crypto rules

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Coinbase, one of the largest cryptocurrency exchanges in the United States, is advocating extension for the industry’s feedback deadline to newly proposed crypto rules by the Treasury’s Financial Crimes Enforcement Network, or FinCEN.

In a Dec. 21 blog post, Coinbase’s chief legal officer Paul Grewal addressed FinCEN’s newly released rulemaking regarding self-hosted crypto wallets. The blog post represents an open letter to Kenneth Blanco, the director of FinCEN.

In the letter, Grewal considered the new rules by the Treasury’s Financial Crimes Enforcement Network, as an “unfortunate and disappointing departure” from the company’s long-running relationship with the regulator.

Grewal elaborated that the 15-day period granted by FinCEN to the industry to respond to the new rules is not enough, especially given that it is spanning Christmas holidays and comes amid the COVID-19 pandemic:

“FinCEN asked the public to provide comments in just 15 days, spanning Christmas Eve, Christmas Day, New Year’s Eve, and New Year’s Day, in the middle of a global pandemic — leaving just a handful of actual working days for comments.”

As such, Coinbase’s legal executive asked FinCEN to “reconsider its haste” and provide a typical 60-day period notice-and-comment for the proposed rulemaking. Grewal noted that 60-day comment periods to regulations represent an ordinary practice by FinCEN in terms of the traditional financial industry. “For example, FinCEN’s Customer Due Diligence Requirements for Financial Institutions provided the traditional 60 days for notice and comment,” Grewal noted.

The exec went on to say that an extended notice-and-comment period will provide the industry with a “true opportunity to engage in the review and comment process with respect to the proposed rule as the law requires.” Grewal wrote:

“There is no emergency here […] There is also no justification for treating the cryptocurrency industry so differently from our counterparts in traditional finance. […] The same rationale applies even more so in the midst of a global pandemic.”

Previously, major industry figures like Circle CEO Jeremy Allaire criticized the new rules, appealing for regulators to collaborate with the industry in adopting crypto regulations. Several members of Congress including representatives Warren Davidson and Tom Emmer also opposed the rumored ban on self-hosted crypto wallets on Dec. 9.



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Regulation

New York authorizes first Yen stablecoin operator in the US

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New York has given the first authorization to a stablecoin backed by the Japanese Yen to operate in the U.S.

Per a Dec. 29 announcement, the New York Department of Financial Services has granted Japanese firm GMO-Z.com a charter to handle U.S.D. and Yen-backed stablecoins in New York. 

Given New York’s status as a global center, the NYDFS is the most prominent state financial regulator in the U.S. It is also one of the most aggressive. A pass to operate in New York often opens up the rest of the country. 

GMO’s charter is as a limited liability trust company rather than a full bank, the principle difference being in authorization to handle deposits. While a stablecoin operator typically needs the ability to hold reserves of the pegged asset, GMO’s charter limits its rights to hold other kinds of deposits not central to its ability “to issue, administer, and redeem” its stablecoins. 

The right to issue such non-depository charters has been a bone of contention between state regulators like the NYDFS and national banking regulators in the U.S. 

GMO president and CEO Ken Nakamura said: “We’re breaking ground with our move to issue the first regulated JPY-pegged stablecoin, which many see as a safe haven asset.” 

The NYDFS recently made changes to its famous BitLicense, including a conditional format that buddies up newly licensed firms with existing licensees. The first conditional BitLicense went to PayPal, facilitating the launch of its new crypto services earlier this fall with the help of longstanding licensee Paxos.