In October, the Financial Crimes Enforcement Network proposed a new regulatory regime for crypto mixing services that would treat the entire class of privacy tools as money laundering threats and force new recordkeeping rules on U.S. people or entities that use them. The industry had a chance to weigh in. Here’s the gist of their responses.
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The Story Unfolds
In October, FinCEN published a notice of proposed rulemaking suggesting it might designate crypto mixers as primary money laundering concerns, and asking for public feedback through a comment period which closed last week.
Significance of the Matter
Crypto mixers – privacy tools that let users obscure the origin or source of funds when transacting – have been controversial in U.S. national security circles due to concerns that malicious actors are using them to launder funds from hacks or to support terrorist organizations. The U.S. sanctions watchdog, OFAC, has added several mixers to a global blacklist in efforts to lock these entities out of the global financial system. Its sanctions against Tornado Cash in particular have drawn legal challenges.
Analyzing the Reactions
There were some 2,000 comments posted as of the time of writing this (of which I read or skimmed a couple dozen), with respondents raising concerns that the proposed rule would infringe on personal rights, capture more of the crypto ecosystem than FinCEN intends and drive legitimate crypto use offshore.
Respondents ranged from privacy-focused wallet providers to industry lobbyists to analytics firms to decentralized finance projects, among others.
The Crypto Regulatory Wrestling Match: FinCEN’s Heated Showdown
After a recent proposal to implement new Know Your Customer (KYC) requirements for cryptocurrency transactions was announced by the Financial Crimes Enforcement Network (FinCEN), the public has rallied together to voice their opinion, resulting in a mélange of responses that range from fervent support to fervid opposition.
Tumultuous Feedback
The outpouring of comments has triggered a storm of scrutiny on the proposed plan. While some hail it as a much-needed security measure, others decry it as an invasion of privacy and an affront to the fundamental tenets of cryptocurrency. Amidst the fervor, there lurk a few miscellaneous remarks that seem far removed from the heart of the matter, with subjects ranging from an inexplicable endorsement of Richard Heart of Hex notoriety to a show of solidarity for the Financial Innovation and Technology for the 21st Century Act.
As the virtual dust surrounding the influx of comments begins to settle, FinCEN will be tasked with meticulously sifting through the myriad of public opinions before officials make a decision on the fate of the proposal, including the possibility of finalizing it, revising it, or pursuing alternative courses of action.
Following the recent events, the European Banking Authority will convene to discuss prudential regulation specifics within the Markets in Crypto Asset regulatory framework.
Diverse Voices and Disparate Stories
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If you have any thoughts on what should be discussed next week or any feedback to share, you can reach out via email at nik@coindesk.com or connect on Twitter @nikhileshde.
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Until next time!
The opinions expressed herein are solely those of the author and do not reflect the views of Nasdaq, Inc.
