The U.S. Treasury Department Pushes for Stricter Monitoring of Crypto Mixers
The U.S. Treasury Department is advocating for new regulations that would enhance monitoring and reporting capabilities on virtual currency mixers used by illicit actors and terrorist groups. This move comes as the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) increases its efforts to combat crypto terror financing, citing geopolitical tension between Israel and Hamas as a reason for concern.
FinCEN has published a Notice of Proposed Rule Making (NPRM) that outlines the need for legislation requiring financial institutions to track, report, and potentially block transactions involving suspicious convertible virtual currency (CVC) mixers. This marks FinCEN’s first use of Section 311 authority to target transactions related to money laundering.
CVC mixing enables ransomware operators, rogue state actors, and other criminals to fund their illegal activities and hide their illicit gains. This is FinCEN’s first-ever use of the Section 311 authority to target a class of transactions associated with primary money laundering concerns.
Andrea Gacki, FinCEN Director
The proposed rule is currently under review, and the public has 90 days to provide feedback. While FinCEN’s focus is on improving financial security, some believe that this proposal could have negative implications for mixing services.
This is more about national security surveillance through domestic financial institutions rather than outright prohibition like a sanctions regime. However, it does bring mixers under scrutiny in a negative way.
Bill Hughes, ConsenSys lawyer
This announcement from FinCEN follows sanctions imposed by the Treasury Department’s Office of Foreign Assets Control on Buy Cash, a Gaza-based crypto exchange. Senator Elizabeth Warren and over 100 lawmakers are also advocating for additional regulations to combat money laundering and war financing involving blockchain-based tools and platforms.
While authorities worldwide are taking measures to cut off financial support to terrorist groups, non-state actors are using digital tokens and cryptocurrencies to provide humanitarian aid to displaced citizens and war-torn areas.
Hot Take: Tighter Regulations on Crypto Mixers Aim to Combat Illicit Financing
The U.S. Treasury Department’s push for stricter monitoring and reporting of crypto mixers is a response to the growing concern over illicit financing through virtual currencies. By targeting convertible virtual currency (CVC) mixers, the government aims to disrupt the flow of funds used by ransomware operators, rogue state actors, and other criminals.
While this move raises concerns about potential negative impacts on mixing services, it underscores the importance of combating money laundering and terrorist financing. The proposed regulations would require financial institutions to track, report, and potentially block transactions linked to suspicious CVC mixers.
As the public has the opportunity to provide feedback on the proposed rule, it remains to be seen how these regulations will be implemented. However, it is clear that national security surveillance through domestic financial institutions is a priority for the U.S. government in its efforts to tackle illicit financing in the crypto space.
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