If you have ever wondered why the headquarters of most cryptocurrency exchange platforms are located outside of the United States, a recent news story about a proposed financial rule does a very good job of explaining this situation. The story involves an agency of the Treasury Department, and it is related to a rule that would put additional burdens on digital currency trading.
The U.S. Financial Crimes Enforcing Network, more commonly known as FinCEN, is an agency of the Department of Justice that is charged with monitoring American financial institutions for compliance with the U.S. anti-money laundering laws. A rule proposed by the agency would pressure exchanges to disclose the identities of traders who participate in any transaction worth more than $3,000. FinCEN would also require additional reporting on all transactions higher than $10,000. Considering that Bitcoin was trading in the $60K range around the middle of March, this proposed rule seems onerous to Coin Center, a cryptocurrency advocacy group.
Coin Center has been actively participating in the public comment period of the proposed rule, and the group has vehemently stated its position against the reporting requirements, especially with regard to transactions over $3,000. While it would be fairly easy for exchange platforms to implement this reporting system because everything is digital, they would be reticent to push this level of compliance to their customers. This is why many exchanges do not operate in the U.S.; in fact, some retail stock and forex brokers prefer to not even do business with American traders.
To get an idea of the work conducted by this agency, between 2004 and 2005 FinCEN reported $6.5 billion in assets and under investigation. In February 2006, FinCEN was made the principal agency to investigate the activities of the U.S. Secret Service (USSS) and other federal agencies. The U.S. Treasury provides funding and regulatory principles for FinCEN, but the agency gets to make its own rules as long as they are under legislative oversight. FinCEN has taken on a wide range of enforcement, including financial, immigration, criminal, consumer protection, and banking investigations. The agency's office in New York City reports to the Office of United States Trade Representative under the Foreign Affairs and International Affairs (USTR) chairmanship.