Summary
The US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has proposed classifying convertible virtual currency mixing (CVC mixing) as a “class of transactions of primary money laundering concern.” CVC mixing is a process that blends different crypto transactions to obscure the original source, making it harder to trace specific transactions. However, industry players, including the Blockchain Association and Coinbase, have objected to the proposal, arguing that it is too broad and fails to consider the legitimate uses of crypto mixing. They also argue that the proposal will stigmatize legitimate digital asset activity and impose significant costs on the industry. Coinbase also criticized the proposal for lacking a monetary threshold for record-keeping and reporting obligations. The FinCEN proposal follows the US Treasury Department’s addition of decentralized cryptocurrency mixing service Tornado Cash to its sanctions list in August 2022.
Key Points
1. The US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) proposed classifying convertible virtual currency mixing as a class of transactions of primary money laundering concern.
2. The Blockchain Association argued that FinCEN’s proposal is too broad and fails to consider the legitimate uses of crypto mixing, which can provide privacy similar to traditional financial transactions.
3. Coinbase challenged the proposal, stating that regulated virtual asset service providers already report suspicious activity related to illicit mixing, and the proposal lacks clarity on record-keeping and reporting obligations.