Coinbase Criticizes US Treasury’s Proposed Rule on Crypto Mixing
Coinbase has voiced its criticism of the US Treasury’s proposed rulemaking on cryptocurrency mixing, arguing that it fails to address regulatory gaps and imposes unnecessary burdens on crypto platforms. In its comment submitted to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), Coinbase stated that regulated platforms already comply with recordkeeping and reporting rules for suspicious activities and illicit crypto mixing. The company expressed concerns about the inefficiency and resource utilization of reporting all crypto mixing activities, including those with legitimate purposes. Coinbase also highlighted the absence of a monetary threshold for recordkeeping and reporting, which would result in bulk reporting of non-suspicious transactions.
Treasury Needs a More Targeted Approach
In a post on X (formerly Twitter), Paul Grewal, Chief Legal Officer of Coinbase, emphasized the need for a more targeted approach. Grewal suggested that specific guidance would be more effective than mandatory bulk reporting rules, as has been done in other areas by the Treasury. He called for adding a money threshold to minimize unhelpful information reported and mitigate the burden on exchanges. Grewal also recommended making the rule a recordkeeping requirement rather than a reporting one and providing an extended implementation period.
FinCEN’s Mixing Rulemaking Could Impact Bitcoin’s CoinJoin Services
If FinCEN’s new rules are implemented, they would classify the mixing of convertible virtual currencies as a “primary money laundering concern,” affecting both dedicated tumblers like Tornado Cash and service providers utilizing basic privacy protocols. The proposed rules would require financial institutions to maintain records and reports related to transactions involving digital asset tumblers. Operators of crypto tumblers would be subject to know-your-customer (KYC), anti-money laundering (AML), and combating the financing of terrorism (CFT) requirements. FinCEN’s rulemaking is based on Section 311 of the USA Patriot Act, which grants the Treasury Secretary the authority to take measures against entities identified as “primary money laundering concerns.”
Hot Take: Coinbase Slams US Treasury’s Proposed Requirement for Crypto Platforms to Report All Mixing Activities
Coinbase has criticized the US Treasury’s proposed rulemaking on cryptocurrency mixing, stating that it fails to effectively address regulatory gaps while placing unnecessary burdens on crypto platforms. Coinbase argues that regulated platforms already comply with recordkeeping and reporting rules for suspicious activities and illicit crypto mixing. The company expresses concerns about the excessive utilization of resources by such reporting. Coinbase also highlights the absence of a monetary threshold for recordkeeping and reporting, asserting that this approach would result in the bulk reporting of non-suspicious transactions.
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