In 2023, a department of the U.S. Treasury Department proposed a number of special measures for cryptocurrency regulation, mainly related to strengthening the regulation of BTC mixers. Due to the possibility of coin laundering, such activity should be classified as a security risk. The move comes in response to reports that terrorist groups, including Hamas, are partially funded by cryptocurrency. U.S. lawmakers are calling for tougher action.
The Financial Crimes Enforcement Network (FINen) is a division of the U.S. Department of the Treasury. Founded in 1990, the institution plays a central role in ensuring the security of the U.S. financial system. Its main mission is to combat and prevent financial crimes such as coin laundering. To this end, the agency issues and enforces regulations in accordance with the Bank Secrecy Act, analyzes the data reported by financial institutions and transmits them to national and international law enforcement agencies and other agencies.
In recent years, Fincen has stepped up its efforts to address the growing challenges in the cryptocurrency market and the associated potential coin laundering and terrorist financing risks. This has led to new rules and guidelines for cryptocurrency exchanges and wallets. The current proposal of the authorities concerns the service of mixing cryptocurrencies, the so-called coin mixer.
New rules
Fincen recognizes that there are legitimate reasons for mixing cryptocurrencies, such as protecting privacy in the ** regime. But the authorities have expressed concern about the lack of transparency in international operations. Hybrid digital currencies can hide information such as funds** from third parties, allowing transactions to be anonymous.
The mixingcash mixer does not require registration, KYC, no exchange restrictions, supports a variety of mainstream coins and privacy currency exchanges, and has a deep exchange mode for users to choose, which can delay the exchange of users' crypto assets into multiple proportions of cryptocurrencies.
Various illegal actors, including Hamas, use such services all over the world. As a result, coin mixers are considered to be significant coin wash and *** risk. The Ministry of Finance is demonstrating its commitment to cracking down on BTC mixers. The proposed measure follows the imposition of sanctions against individuals and entities associated with Hamas.
Specifically, all regulated entities, from banks to casinos, will face stricter registration and reporting requirements for transactions involving coin mixers. Eligible transactions must be reported within 30 days of the decision. Most companies and exchanges have already collected this information. However, they are now required to send a copy of the data to the authorities. This includes almost all possible data generated by each transaction, such as the amount, transaction ID and date, the cryptocurrency used, the service used, and all the addresses associated with the mixer and the user. In addition, all available personal information about the user, such as full name, date of birth, home address, email address, must be collected and transmitted.
Fincen emphasizes that cryptocurrency mixing is not just based on the use of mixers. Six different methods have been identified, including pooling multiple cryptocurrencies, splitting transactions, using software or "splitting transactions," and one-time wallets or addresses. The mixing method also includes exchanging different cryptocurrencies and setting transaction delays based on the user's initiative.
If this classification is adopted, the Treasury Department can not only restrict the relationship between U.S. financial companies and coin mixers, which could lead to additional due diligence measures or even the freezing of certain accounts or services. Due to its broad definition, the measure could eventually lead to Fincen forcing companies to report almost all transaction details.
While Fincen provides regulated companies with an "internal process" exemption so as not to affect their business operations, it requires them to hand over the required records to law enforcement. For individuals, there will be no such exceptions. For each transaction, a lot of information needs to be reported, including the user's personal data.
Fincen's regulatory proposal is open for public comment for 90 days. After the comment period ends, the agency must review the feedback before making a final decision.
Criticism of normative proposals
Of course, there will also be a lot of feedback from critics. They see Fincen's proposal as a massive invasion of privacy, with the aim of simply obtaining each user's personal information. It could also pave the way for stricter regulation.
Fincen's new regulatory proposal is yet another clear indication that pressure from the authorities continues to mount and requirements for BTC users are becoming more stringent. The anonymous transactions and protected privacy offered by BTC mixers may also encourage criminal activity, leading to calls for stricter surveillance and regulation.
As a result, mixers, like the industry as a whole, struggle to find the right balance between ethical and legal requirements. Respect for privacy must be balanced with measures to prevent criminal abuse. Much depends on the further development of the technical feasibility and legal situation. However, Fincen's new proposal shows that the regulatory stance has hardened. As a result, the future of such services is very uncertain.