The U.S. Treasury Department has proposed categorizing cryptocurrency mixers as a “primary money laundering concern” in a move that could severely limit their interactions with U.S. firms and users.
- The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has proposed categorizing crypto mixers as a “primary money laundering concern”.
- This would allow imposing restrictions on financial firms’ dealings with mixers, ranging from extra diligence to prohibiting accounts.
- The move aims to combat use of crypto by terrorists and bad actors like Hamas, Palestinian Islamic Jihad, and North Korea.
- FinCEN cites crypto donations to Hamas ahead of recent attacks on Israel as evidence of the problem.
- If finalized after a 90-day comment period, the rule could severely limit mixer interactions with U.S. firms and users.
- Some argue only a small portion of crypto activity involves illegal transactions, but terrorism financing has put pressure on regulators to act.
The Treasury’s Financial Crimes Enforcement Network (FinCEN) announced it is seeking to impose the sweeping anti-money laundering designation on all crypto mixers for the first time. Mixers attempt to obfuscate transaction details for user anonymity.
FinCEN says the lack of transparency around mixer services facilitates illicit finance, naming terrorist organizations like Hamas as abusing these tools. Crypto donations to Hamas reportedly preceded recent attacks on Israel, putting pressure on regulators to curb potential terrorism financing.
If implemented after a 90-day comment period, the proposed rule would allow Treasury to impose restrictions ranging from enhanced diligence to outright prohibitions on accounts and transactions related to designated mixers.
Previously, Treasury targeted individual mixing services like Tornado Cash and Blender.io with sanctions, but this proposal marks its first attempt to restrict an entire class of transactions.
FinCEN Director Andrea Gacki noted the move is meant to combat ransomware groups, hostile states, and other criminals exploiting mixers. However, some argue the scope fails to recognize most crypto activity is legal.
Nonetheless, terrorism financing concerns have mounted with reports that Hamas, Palestinian Islamic Jihad, and even North Korea have used mixers to obfuscate funds. Lawmakers have urged action to cut off potential avenues of illegal crypto flows.
The question now is whether the proposal paints with too broad a brush in effectively designating all mixers as illicit, given their pseudonymous nature. But with national security cited as justification, the public comments will reveal how much opposition this far-reaching move generates.
If mixers face severe restrictions in interfacing with U.S. counterparties, it could make conducting anonymous crypto transactions significantly harder. While Treasury says transparency is needed to prevent abuse, privacy advocates will likely warn of overreach in blacklisting an entire category of services over anonymity.
Editor-in-Chief of Blockonomi and founder of Kooc Media, A UK-Based Online Media Company. Believer in Open-Source Software, Blockchain Technology & a Free and Fair Internet for all.
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