Cryptocurrency firms, including Coinbase, Consensys, and Paradigm, are calling on the US Treasury to review its proposed reporting requirement for crypto mixers. The firms all argue they drain resources, lack specificity, and are a “waste of time.”
Coinbase, Consensys, and Paradigm have argued to the US Treasury to reconsider its proposed reporting guidelines for transactions involving crypto mixers, arguing they inadequately address a regulatory gap while draining resources from crypto platforms.
Coinbase and Others Suggest Treasury Stop Wasting its Time with Crypto Mixers
In a January 22 letter sent by Coinbase in response to the Treasury Department’s Financial Crimes Enforcement Network’s (FinCEN) notice of proposed rulemaking involving crypto mixers, the exchange said the proposals are burdensome, ineffective, and overly broad.
The FinCEN’s notice of proposed rulemaking suggests “requiring domestic financial institutions to implement recordkeeping and reporting requirements on transactions involving convertible virtual currency mixing.” According to Coinbase, the proposed requirement for crypto platforms to report all mixing activities is ineffective, overly broad, and burdensome.
Coinbase argues that there is no “regulatory gap” concerning crypto mixers as regulated entities such as Coinbase already file Suspicious Activity Reports (SARs) on illicit crypto mixing transactions over $2,000. The exchange also argued the proposed rules would “lead to bulk reporting of data of little help to law enforcement.” Coinbase added the proposed regulations would invade privacy and pose a security risk by centralizing sensitive information, especially since not all mixing activities are illicit. The exchange highlighted that while it does acknowledge crypto mixing can be used for legitimate purposes, FinCEN addresses it briefly. Coinbase continued, “There is nothing suspicious or illicit in desiring such a modicum of financial privacy from the world.
FinCEN Cautions Against Crypto Being Used for Terrorist Financing
FinCEN warned about virtual currency being used to finance terrorist organizations in October 2023. FinCEN cited Hamas’ reliance on “fundraising campaigns involving virtual currency and fictitious charities raising both fiat and virtual currency.” The department also mandates that virtual asset providers report suspicious transactions linked to Hamas immediately.
Coinbase took issue with FinCEN’s proposed reporting requirements, stating:
“This is not simply a misuse of VASPs’ [virtual asset service providers] finite compliance resources; it is exactly the kind of bulk reporting that Congress has explicitly discouraged.”
Coinbase also raised the issue of regulatory uncertainty in the US.
“This NPRM comes at a time of enormous opportunity for the United States to lead the world in digital asset innovation, but this opportunity depends in significant part on U.S. regulators, like FinCEN, creating a regulatory landscape that fosters the growth of compliant companies while holding accountable those that fail to meet their obligations.”
Consensys and Paradigm Support Coinbase’s Objections
Coinbase received support from Ethereum software solutions provider Consensys and crypto venture capital firm Paradigm.
Consensys also submitted a letter to FinCEN, arguing the department must find a security solution which preserves privacy. Bill Hughes, a lawyer for Consensys, said:
“Today, @Consensys submitted a letter to FinCEN concerning its proposal to have regulated financial intermediaries surveil and report activity relating to crypto token mixers. TLDR: if this has to happen, then please make it narrow enough not to do real damage to the ecosystem and its users.”
Paradigm filed a separate response stating the proposed rule “is not the appropriate tool to address the FinCEN’s stated concern.”
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
