The head of the agency that enforces the Bank Secrecy Act and KYC requirements in the U.S. says the agency aims to help crypto innovate responsibly.
In a May 27 interview sponsored by Chainalysis, Director of the United States Financial Crimes Enforcement Network (FinCEN) Kenneth Blanco was adamant that the regulator is not the enemy.
“This technology belongs to all of us”
FinCEN is the governing body that enforces the Bank Secrecy Act in the U.S., requiring financial institutions to provide know-your-customer (KYC) information. It’s a contentious topic within crypto, so it is no surprise that Blanco was careful to portray FinCEN as a part of the environment.
Blanco lamented “that we’re allowing a technology that could be so beneficial to be hijacked by people,” continuing to explain FinCEN’s role as being part of protecting crypto:
“This is ours. This technology belongs to all of us. Don’t let a few people use it for bad acts or rogue nations steal it for bad things.”
Many in the crypto sphere are, however, skeptical that agencies like FinCEN are operating in the best interests of the industry.
KYC controversy and Chainalysis
Interviewing the FinCEN director was Jesse Spiro, the global head of policy for crypto analytics firm Chainalysis. A major recipient of grant money from the U.S. government, Chainalysis has attracted criticism from crypto advocates opposed to state involvement.
Blanco rejected the notion of crypto operating outside of normal financial rules. He said:
“If you’re doing business here in the United States, in whole or substantially, you have to abide by our regulations and laws. Period. […] And by the way, at the end of the day, that makes you safer too.”
The question of whether KYC heightens safety is controversial. Chainalysis recently published research suggesting that just over 1% of crypto transactions last year were for illicit purposes, the elimination of which is the stated purpose of KYC requirements.
Many worry that centralizing client information in exchange databases runs greater risks. For example, a recent data breach at BlockFi exposed the KYC documents of users, revealing physical addresses.