Proposed Rules Could Impact Crypto Mixers
The Financial Crimes Enforcement Network (FinCEN) has introduced a notice of proposed rulemaking that could have significant consequences for crypto mixers, including Bitcoin’s CoinJoin. If implemented, these rules would categorize the mixing of virtual currencies as a “primary money laundering concern,” affecting dedicated tumblers like Tornado Cash and service providers utilizing basic privacy protocols. The proposal aims to address concerns over malicious actors using crypto mixers to launder illicit funds. FinCEN specifically cited groups such as Hamas, Palestinian Islamic Jihad, Russian criminal organizations, and the Democratic People’s Republic of Korea as examples. The proposed rules would require financial institutions to maintain records and reports on transactions involving digital asset tumblers, subjecting operators to KYC, AML, and CFT requirements.
CoinJoin Services Under Threat
The new regulations could heavily impact CoinJoin services. In August last year, Tornado Cash faced sanctions from the Office of Foreign Asset Control (OFAC), resulting in a significant decline in transaction volume. CoinJoin services like CoinJoinXT and Wasabi Wallet could also be affected by FinCEN’s proposed rules, potentially increasing obligations for operators to collect and disclose extensive data to the government. This may make it more challenging for users to legally utilize such services. The proposed rules will undergo a 90-day public comment period before potential enactment by Treasury Secretary Janet Yellen.
Hot Take: The Implications of FinCEN’s Proposed Rules on Crypto Mixers
FinCEN’s notice of proposed rulemaking poses a potential threat to the privacy and anonymity offered by crypto mixers like CoinJoin. While the aim is to combat money laundering and illicit activities, these regulations may have unintended consequences for legitimate users seeking financial privacy. By subjecting operators to stringent compliance measures, the proposed rules may hinder the functionality and accessibility of CoinJoin services. It remains to be seen how these regulations will evolve during the public comment period and what impact they will have on the crypto community as a whole.
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