Twitter CEO Jack Dorsey has warned that proposals for tighter regulation of Bitcoin and other cryptocurrencies could backfire, damaging US-based financial companies.
In an open letter to the Financial Crimes Enforcement Network (FinCEN), the agency behind the proposed new regulations, Dorsey said that the rules, designed to allow for greater oversight over cryptocurrency activity in the United States, would create ‘unnecessary friction and perverse incentives for cryptocurrency customers to avoid regulated entities for cryptocurrency transactions.’
Dorsey isn’t exactly an unbiased party in this debate. The Twitter founder is also the CEO of digital financial services company Square, which recently bought $50 million in Bitcoin and has plans to increase its involvement in the wider cryptocurrency ecosystem.
In the letter, which was published this week on Square’s website, Dorsey wrote:
To put it plainly — were the [regulations] to be implemented as written, Square would be required to collect unreliable data about people who have not opted into our service or signed up as our customers…
The burdensome information collection and reporting requirements deprive U.S. companies like Square of the chance to compete on a level playing field to enable cryptocurrency as a tool of economic empowerment.
Dorsey is one of a number of tech and privacy advocates raising concerns about the regulations, which include a provision that would require financial institutions to collect the name and address of anyone sending or receiving a large cryptocurrency transaction.
FinCEN claims that the regulations will help deter criminals using cryptocurrency for illegal activities like money laundering, but opponents have argued that they could also convince ordinary users to avoid using US banks when dealing with cryptocurrency.
Essentially, the worry for American financial services companies is that, unless other countries introduce similar regulations, the US will become a less attractive place for cryptocurrency users to do business, many of whom find the current anonymity of transactions a major plus point.
According to Dorsey, the ‘nonsensical’ regulations could end up having the unintended consequence of giving FinCEN ‘less visibility into the universe of cryptocurrency transactions than it has today.’
Square isn’t the only FinTech company betting big on cryptocurrency, with various platforms, such as PayPal, planning to introduce support for cryptocurrency transactions as the virtual payment trend gains popularity. Bitcoin is currently reaching new heights in terms of value, and started 2021 off with a bang by breaking the $34,000 mark for the first time.