Understanding the Proposal from FinCEN

The United States Treasury Department’s Financial Crimes Enforcement Network (FinCEN) is making waves, and not just because more people are Googling how to ‘mix’ coins at the local arcade. On October 19, FinCEN issued a notice proposing to designate cryptocurrency mixing as a primary concern for money laundering, with the shadow of recent terrorist acts hanging over its head. Their assessment indicates that the use of CVC (convertible virtual currencies) mixers for transactions stemming from dubious origins is on the rise.

Why the Sudden Focus on Cryptocurrency Mixing?

You might be wondering, why all the fuss? Well, in the wake of Hamas’ recent activities, FinCEN has tied the increase in illicit crypto activity directly to major terrorist groups. Deputy Treasury Secretary Wally Adeyemo pointed out that state-affiliated cyber actors have been exploiting digital assets in ways that most of us can only dream of—if your dreams include being a villain in a James Bond movie.

What Will Change?

FinCEN is suggesting that local financial institutions will need to embrace new recordkeeping and reporting requirements for transactions involving crypto mixers. This isn’t like asking businesses to keep better receipts for their lunchtime ice cream runs; this is serious stuff. The rules aim to capture transactions that could potentially fund nefarious activities, making it harder for the bad guys to hide their assets. Can you imagine terrorist groups trying to sneak their funding through a legal loophole? Not while FinCEN is on the case!

The Broad Approach to Terror Finance

Even though FinCEN initially considered a more focused approach—aiming at just a few specific threats—they decided against it. Why? Because they realized that terrorism is a many-headed hydra (no, not the monster from Greek mythology). Any effective policy needs to address a wider range of risks, not just the gardens of Hamas and ISIS. So they rolled out a proposal that doesn’t pull any punches.

The Involvement of Lawmakers

A chorus of more than 100 members of Congress is now waving a giant red flag over this issue, encouraging the Biden administration to take swift action. It’s like your grandma telling you to clean up your room but for a whole nation. They want the crypto world to be less of a Wild West show and more like a calm, orderly library.

The Tornado Cash Precedent

Speaking of sweeping changes, last year the Treasury’s Office of Foreign Assets Control effectively barred U.S. residents from using Tornado Cash. They made their move because certain crypto addresses were linked to suspicious activities. This decision was met with a lawsuit from individual users—backed by none other than crypto exchange Coinbase. But a federal judge sided with the Treasury, ruling that they were operating within their legal bounds. Talk about a rainy day for crypto mixers!

What’s Next?

Now, here’s where you come in—sort of. FinCEN is opening the floor to public comments on this proposal, allowing citizens to weigh in within a 90-day window. So if you have thoughts on these new regulations, sharpen your quills (or keyboards) and get ready to express your opinions. Who knows? You might just inspire a change that helps to protect the integrity of digital currencies!