Press Release

U.S. Treasury Says No Ban on Crypto Mixers

The Treasury clarifies that it is not outlawing cryptocurrency mixers, and what is expected within a year is comprehensive cryptocurrency legislation.

TakeAway Points:

  • The U.S. Treasury makes clear that FinCEN’s new rule is not intended to outlaw cryptocurrency mixers; rather, it seeks to promote openness.
  • Under Secretary of the Treasury Brian Nelson highlights working with the cryptocurrency sector to improve privacy while preventing funding of terrorism.
  • Because most mixers are viewed as means of getting around AML and KYC regulations, undesirable actors like North Korea find them appealing.

Treasury explains position on cryptocurrency mixers

Brian Nelson, the Treasury’s Under Secretary for Terrorism and Financial Intelligence, made a major announcement during CoinDesk’s annual Consensus conference in Austin, Texas, making it clear that the U.S. Department of Treasury is not looking to outlaw cryptocurrency mixing services. 

Following the Financial Crimes Enforcement Network’s (FinCEN) 2023 proposal, which seeks to designate mixers as a “major money laundering concern” and requires virtual asset service providers (VASPs) to notify the organisation of any cryptocurrency transactions involving mixing, this declaration was made.

“At the end of the day, this [proposal] is not a ban on mixers. This is a proposed rule designed to drive transparency.” Nelson said.

Although he recognised the need for financial privacy among the crypto community, he emphasised that business and Treasury cooperation was necessary to improve privacy without aiding in the funding of terrorism. Nelson said that many mixers are made to avoid know-your-customer (KYC) and anti-money laundering (AML) regulations rather than to improve privacy, which attracts criminals like North Korea.

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

Momentum in the Law for Crypto Regulation

At the Consensus conference, House Financial Services Committee chairman Rep. Patrick McHenry (R-N.C.) made a big prediction: the United States will have comprehensive crypto legislation within the next year. McHenry emphasised the broad support from both parties for his Financial Innovation and Technology for the 21st Century Act (FIT21), which was just passed by the House. 

“With certainty, we will have a crypto law within the next year,” McHenry declared. 

He underlined that the House vote’s momentum, which aims to regulate stablecoin issuers and create a transparent market structure for digital assets, would, if required, continue into the next legislative session.

Despite noting the difficulties of the Senate, McHenry, who will retire at the end of the year, stated that he was committed to seeing the measure through to completion. To get the bill enacted before he leaves, he suggested linking it to “everything and everything.” Similar to McHenry, senior Republican caucus member Rep. Tom Emmer (R-Minn.) believes that the lame-duck session at the end of the year may be the best opportunity for crypto legislation. Emmer pointed out that the FIT21 plan will probably need to undergo another round of House approval due to revisions requested by the Senate.

SEC’s Ongoing Inspections and Industry Responses

The U.S. Securities and Exchange Commission (SEC) released a fresh alert alerting the public to cryptocurrency frauds while legislators and industry executives conferred on the future of crypto regulation in Austin.

“Investment scams are frequently carried out by fraudsters using new technologies and innovations; this has been the case with investments related to crypto asset securities,” the SEC’s advisory said. 

This warning highlights the ongoing conflict that exists between regulatory agencies and the cryptocurrency industry, especially under the direction of SEC Chair Gary Gensler, who has come under fire for his strict stance on regulation.

However, Rep. Emmer expressed disapproval of Gensler’s position, implying that the SEC Chair is “on his way out” and falling out of favour with the government. Emmer also noted that Democrats are becoming more supportive of crypto concerns in spite of criticism from well-known individuals such as Sen. Elizabeth Warren (D-Mass.) and President Joe Biden. He emphasised the broad support from both parties for repealing the SEC’s Staff Accounting Bulletin No. 121 (SAB 121), which had strong support from Democrats in both the House and the Senate.

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