US Treasury Official: Unhosted Crypto Wallet Rules Will Allow Innovation
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According to Wally Adeyemo, deputy secretary of the Treasury, people could avoid sanctions and anti-money laundering (AML) checks by keeping crypto anonymously outside of approved venues.
"We're working to address the unique risks associated with unhosted wallets," Adeyemo said during an onstage interview Friday, warning that current arrangements allow inadvertent transactions with criminals or sanctioned individuals. "Unhosted wallets are effectively just addressing on a blockchain," he added. "It can be difficult to determine who really owns and controls them, creating opportunities to abuse this heightened anonymity."
Know Your Customer
Enforcing "know-your-customer" (KYC) identity checks on owners of private wallets was first proposed by then-Treasury Secretary, Steven Mnuchin, in 2020. Still, the proposal has been repeatedly postponed under the Biden administration – while parallel moves in the European Union have raised industry concerns about stifling innovation and privacy.
The possibility that crypto payments could help Russia avoid sanctions imposed in response to its invasion of Ukraine has raised the stakes even higher. However, officials have pledged to work with the industry rather than against it.
"I'm not going to get ahead of our rule-making process," he said, but he guaranteed it would be flexible enough to cope with an industry that changes yearly.