FinCEN seeks tighter controls on crypto mixing services

The proposed rule mandates that regulated financial entities flag transactions suspected of involving crypto mixing, especially those with international implications

article-image

Ink Drop/Shutterstock modified by Blockworks

share

The US Treasury’s Financial Crimes Enforcement Network (FinCEN) is zeroing in on crypto transaction mixers. 

Released Thursday, FinCEN’s Notice of Proposed Rule Making (NPRM) brands crypto transaction mixing as a “primary money laundering concern.” 

The proposal would require regulated financial institutions to report transactions when there is reason to suspect involvement in transaction mixing, particularly concerning activities outside the US.

Mixing is a process that blends different streams of crypto transactions to obscure the original source, thereby making it more difficult to trace individual transactions.

While the proposed rule aims to bolster transparency and curb illicit financial flows, questions remain over its real-world efficacy, particularly given crypto’s inherently decentralized and pseudonymous nature.

The agency’s proposal is part of a broader Treasury offensive against mixing services that began in earnest last year.

Blender.io and Tornado Cash, platforms both implicated in North Korean money laundering activities by US authorities, have spurred regulatory efforts to curb their use.

Read more: Attorneys say DOJ’s Tornado Cash charges contradicted FinCEN guidance

“[Convertible virtual currency] mixing offers a critical service that allows players in the ransomware ecosystem, rogue state actors and other criminals to fund their unlawful activities and obfuscate the flow of ill-gotten gains,” FinCEN Director Andrea Gacki said.

That approach has angered members of the crypto ecosystem. Critics say the Treasury’s Office of Foreign Assets Control, in its fight to clamp down on illicit proceeds, went a step too far — eventually leading to the arrest of a developer and charges against Tornado Cash’s founders.

FinCEN argues its latest proposal aligns with ongoing efforts to counteract a spectrum of threats, from sanctions-dodging countries to groups like Hamas and Palestinian Islamic Jihad.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the On the Margin newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2024

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Permissionless is a conference for founders, application developers, and users. Come meet the next generation of people building and using crypto.

recent research

Unlocked by Template (2).jpg

Research

Vertex has established itself as a formidable player in the perps DEX landscape. Its strategic approach to chain expansion, focusing on EVM-compatible networks and leveraging incentive programs, has proven largely successful. The reduced time-to-launch for each new chain integration highlights the team's growing expertise and the scalability of their technology. As Vertex continues to expand, it is well-positioned to capitalize on the increasing fragmentation of the perpetual DEX market, potentially consolidating liquidity across multiple chains through its Edge technology.

article-image

The challenge of securing our digital world lies in developing conflict-resistant digital infrastructure

article-image

The three actively managed funds target equities in the blockchain and AI realms while seeking to manage volatility

article-image

Plus, Gemini’s trying to get a sense of the state of crypto in a new report

article-image

Hashdex CIO Samir Kerbage says “the global credibility of bitcoin cannot be overstated” in the case of American government buy-in

article-image

The Solana-based creator platform announced its seed round today

article-image

The new Snapshot X protocol uses storage proofs to enable voting without needing to bridge