The Biden administration has identified cryptocurrency “mixers” as major conduits for money laundering.
In a recent announcement, the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) suggested that domestic financial entities and institutions be mandated to “enforce specific recordkeeping and reporting measures” for dealings linked to crypto mixers.
FinCEN pointed out an upward trend in “convertible virtual currency (CVC) transactions facilitated by CVC mixers stemming from likely unauthorized sources.”
This move by the U.S. Treasury Department, using legal instruments commonly applied to overseas banks and territories, is part of a comprehensive initiative to direct the trajectory of the cryptocurrency landscape.
In the aftermath of the October 7 Hamas attack on Israel, there has been intensified scrutiny from Capitol Hill concerning the use of cryptocurrencies in funding extremist groups.
Wally Adeyemo, the deputy Treasury secretary, remarked, “Today’s action highlights the Treasury’s dedication to thwarting the misuse of convertible virtual currency mixers by a myriad of malicious entities, encompassing state-backed cyber actors, cyber felons, and terrorist organizations.”
Before it can potentially be adopted, the proposed regulation will be open for a 90-day public feedback phase.
Furthermore, this proposal provides the targeted bodies an opportunity to undertake corrective measures, which could pave the way for lifting any imposed sanctions.
The Treasury Department highlighted that certain entities previously under the spotlight have overhauled their operations and introduced substantial safeguards to combat money laundering. This proactive approach led to the department opting against finalizing certain restrictive measures.
Mixers are essentially cryptocurrency platforms designed to enable more discreet transactions.
Recently, these platforms have come under heightened regulatory examination. U.S. regulatory bodies have not only sanctioned them but have also brought charges against their creators.
Financial Institutions Will be Required to Collect Info Related to Mixers
The suggested regulations mandate U.S. financial entities and agencies to pinpoint, gather, and relay detailed data tied to international mixer transactions, which encompasses both personal and transaction-specific information.
By formally designating mixers as major hubs for money laundering, the Treasury could gain sweeping authority in terms of sanctions. This might include the capability to exclude specific entities from accessing U.S. markets.
The Treasury is looking to invoke seldom-used powers put in place in the aftermath of the September 11, 2001 terrorist incidents, often termed as “death-knell sanctions.”
These authoritative measures offer the means to shut down foreign banks and various financial establishments perceived as threats to national security.
While mixers constitute just a sliver of the broader cryptocurrency landscape, the suggested rules clearly signal caution to other entities in the crypto space.
Treasury representatives have underscored the pronounced risks tied to money laundering and national security when discussing international convertible virtual currency mixing operations.
The Treasury maintains that bolstering transparency in this arena is pivotal to prevent malevolent entities from tapping into both the U.S. and international financial infrastructures.
Analysts believe that FinCEN’s recent proposal might dampen some crypto operations, associating them more strongly with terrorist funding and money laundering endeavors.
Yet, this move aligns with the trajectory of recent measures by U.S. officials against mixers.
In the past few years, both the U.S. Treasury and Justice Departments have zeroed in on crypto platforms, particularly those offering anonymity features or those with lax compliance mechanisms that could inadvertently aid malevolent individuals in funding their agendas.
Consequently, numerous cryptocurrency platforms have been slapped with sanctions and legal charges on grounds of abetting money laundering activities.