US Treasury Department denies seeking to ban crypto mixers

What’s new? Brian Nelson, the Treasury’s Under Secretary for Terrorism and Financial Intelligence, has commented on the agency’s stance on cryptocurrency mixers aimed at increasing transaction privacy. Last year, the Financial Crimes Enforcement Network (FinCEN) within the Department of the Treasury proposed to tighten the requirements for accounting transactions related to mixers.

Material by CoinDesk

What else is known? Nelson clarified that the order does not imply a ban on cryptocurrency mixing services, but only requires companies to report on transactions related to them, thus increasing transparency.

In its order, FinCEN required financial institutions and agencies to collect and share mixer-related information, including personal information about users and their transactions. Earlier, the US Treasury Department called crypto mixers a threat to national security and announced its intention to recognize them as major hubs for money laundering.

After the order was issued, California-based digital asset management platform Swan Bitcoin said it would block accounts for interacting with crypto mixers due to pressure from bank partners to process fiat payments.

US crypto exchange Coinbase criticized the FinCEN initiative, noting that it forces a lot of additional work while not addressing regulatory gaps in any way.

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US authorities later accused the creators of the Samourai mixer of conducting $2 billion worth of illegal transactions. The developers were detained and the mixer’s servers were seized. According to the sum of the charges, each faces 25 years in prison.

In response, the developers of privacy-focused bitcoin wallet Wasabi Wallet will stop supporting the Coinjoin service for anonymizing crypto transactions starting June 1.

Pressure on such services in the United States was interpreted by some industry participants as an attempt to ban them, in connection with which Brian Nelson made a denial.

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Moreover, Nelson noted that he understands the desire of crypto users to preserve privacy. However, he believes that the industry and the Treasury Department should work together to jointly develop ways to preserve it while preventing the financing of terrorism and other illegal activities.

The official emphasized that most of the mixers he encounters are not actually designed to enhance privacy but to circumvent KYC/AML requirements, making them attractive to malicious actors, including North Korean hackers.

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“It’s not that everybody needs to know who you’re transacting with, just that people and VASPs alike need to know they’re not “unwittingly” funding Hamas or North Korea’s weapons program,” Nelson concluded.