Several prominent cryptocurrency firms, including Coinbase, Paradigm, Consensys, and the Blockchain Association, have collectively voiced concerns over the proposed reporting requirements for transactions involving crypto mixers, urging the United States Treasury to reconsider the rules. These companies argue that the regulations lack specificity, are overly broad, and would impose a significant drain on resources.
In response to the U.S. Treasury Department’s Financial Crimes Enforcement Network’s (FinCEN) notice of proposed rulemaking, Coinbase submitted a letter on January 22, expressing its reservations about the suggested measures. The proposed regulations call for domestic financial institutions to implement recordkeeping and reporting requirements on transactions involving convertible virtual currency mixing.
Coinbase asserted that the proposed requirements are excessively broad, burdensome, and ineffective for two primary reasons. Firstly, the firm contended that there is no “regulatory gap” concerning crypto mixers, as regulated entities like Coinbase already file suspicious activity reports (SARs) on illicit crypto mixing activities exceeding $2,000. Secondly, the proposed rules could result in bulk reporting of data that is of little use to law enforcement, potentially compromising privacy and security.
Coinbase’s Chief Legal Officer, Paul Grewal, highlighted on social media platform X (formerly Twitter) that such data dumps are considered a waste of time and resources, echoing the sentiments expressed by Congress.
FinCEN proposed recordkeeping and reporting rules in October 2023, categorizing cryptocurrency mixing as an area of “primary money laundering concern.” The regulatory body identified an increasing percentage of crypto transactions processed by mixers originating from likely illicit sources. However, Coinbase, along with other firms, urged FinCEN to present a detailed plan outlining how the crypto industry can implement data collection, storage, and reporting before finalizing any new rules.
These proposed regulations are currently in a comment period, subject to public input and potential revisions before FinCEN makes a formal decision on approval and implementation. In addition to Coinbase, other industry participants, including Consensys, the Blockchain Association, Paradigm, and Coin Center, have also submitted responses opposing the broad definition and potential adverse effects of the proposed rules.
