FinCEN proposes designating crypto mixers as money-laundering hubs


The United States Treasury Department’s Financial Crimes Enforcement Network, or FinCEN, has proposed designating cryptocurrency mixing as an space of “primary money laundering concern” following Hamas’ assault on Israel.

In an Oct. 19 discover, FinCEN stated it had assessed that “the percentage of CVC [convertible virtual currencies] transactions processed by CVC mixers that originated from likely illicit sources is increasing.” FinCEN proposed requiring domestic financial institutions and agencies to “implement certain recordkeeping and reporting requirements” for transactions involving crypto mixers.

“FinCEN considered issuing a rule pursuant to section 311 [of the U.S. Patriot Act] that would have been narrowly scoped to address terror finance involving Hamas and ISIS and/or North Korea-sponsored and -affiliated actors,” stated the discover. “However, FinCEN determined that such a narrow approach would be insufficient to address the relevant risks.”

Deputy Treasury Secretary Wally Adeyemo reportedly said the addition of crypto mixers to entities sanctioned by the U.S. authorities was aimed toward combating digital belongings being exploited by “state-affiliated cyber actors, cyber criminals, and terrorist groups.” He cited Hamas — the group accountable for the Oct. 7 assault on Israel — and the Palestinian Islamic Jihad — the group Israel has blamed for an Oct. 17 assault on a Gaza hospital — illicitly utilizing crypto. 

The discover adopted issues voiced by U.S. lawmakers surrounding terrorist organizations allegedly being financed by crypto. On Oct. 17, greater than 100 members of Congress called on the administration of U.S. President Joe Biden to “swiftly and categorically act to meaningfully curtail illicit crypto activity.” Treasury officers additionally added a Gaza-based crypto operator allegedly tied to Hamas to its listing of Specially Designated Nationals on Oct. 18.

Related: Advocacy groups push back against Sen. Warren linking crypto with terrorism

In August 2022, Treasury’s Office of Foreign Asset Control successfully barred U.S. residents from utilizing Tornado Cash after adding several crypto addresses linked to the mixer to its listing of Specially Designated Nationals. The division’s motion prompted a lawsuit introduced by six people backed by crypto trade Coinbase. In August 2023, a federal choose ruled on a summary judgment saying the Treasury Department had operated inside its authority.

According to FinCEN, members of the general public may have 90 days to touch upon the crypto mixer proposal following publication within the Federal Register. The authorities division will probably evaluate all suggestions earlier than contemplating whether or not to enact the proposed crypto mixer coverage.

Magazine: Tornado Cash 2.0: The race to build safe and legal coin mixers