Reading Time: 2 minutesThe US Treasury Department has designated cryptocurrency mixing protocols as money-laundering threats and national security risks
The Financial Crimes Enforcement Network (FinCEN) has proposed regulations to de-anonymize mixer transactions involving U.S. entities
The proposed regulation aims to increase transparency in cryptocurrency mixing activity to prevent illicit actors from accessing the financial system

The US Treasury Department is to target cryptocurrency mixing protocols after designating them as money-laundering threats that pose risks to national security. This designation utilizes laws typically applied to foreign banks and foreign jurisdictions, with the proposed regulation requiring special record-keeping and reporting for any financial transactions involving these international mixers. The move comes amid growing concerns in Capitol Hill regarding the potential role of cryptocurrencies in financing militant groups, particularly in the wake of the Hamas attack on Israel in October.

FinCEN Worried About Crypto Mixer Anonymity

The new regulatory proposal, introduced by the Financial Crimes Enforcement Network (FinCEN), takes advantage of rarely-used powers created after the September 11, 2001 terrorist attacks, which can effectively close foreign banks and financial institutions that are deemed national security threats.

If adopted, US financial institutions and financial agencies would be required to identify, collect, and report specific information related to international mixer transactions, including personal and transactional data. This designation of mixers as primary money-laundering agents could grant the Treasury broad sanction authority, including the ability to cut off targeted entities from U.S. markets.

The proposed regulation will be open for public comment for 90 days before potential adoption, allowing likely targets to take pre-emptive action to avoid being caught in the net. Notably, the proposal aims to address the anonymity associated with cryptocurrency transactions, with FinCEN claiming that this anonymity can pose risks to national security.

In justifying this action, the Treasury stated that increasing transparency in international cryptocurrency mixing activity is vital to prevent illicit actors from accessing the US and global financial systems. However, many in the sector believe that tarring all pro-anonymity protocols could tar them with the same brush as criminal entities when all they re doing is preserving an individual’s right to privacy. 

FinCEN Needs to Strike a Balance

While FinCEN is focusing on crypto with this, and other, rule changes, most illicit finance is still conducted through the traditional financial system, something that crypto supporters have not been slow to point out.

Anti-crypto legislators, such as the infamous US politician Brad Sherman, have urged the administration to take meaningful action to curb illicit crypto activity while protecting national security and that of US allies. However, there are concerns about overly burdensome regulations stifling financial innovation crucial for the country’s economic and national security.

If properly handled, authorities’ focus on anonymity in cryptocurrency transactions could allow the fintech sector to thrive while mitigating associated risks, unlocking the potential for blockchain technology to be a powerful tool authorities can use to trace money laundering and terror financing.

The post FinCEN to Target Crypto Mixers Over Laundering Fears appeared first on FullyCrypto.

---

Filed under: Bitcoin - @ October 20, 2023 8:14 am