U.S. Treasury Isn’t Trying to Ban Crypto Mixers, Top Official Says

At the yearly Consensus conference of CoinDesk, Brian Nelson, the Under Secretary for Terrorism and Financial Intelligence at the U.S. Treasury Department, discussed FinCEN’s proposed classification of crypto mixers as a major money laundering concern in 2023. According to this proposal, VASPs (Virtual Asset Service Providers) would be mandated to report any transactions involving these mixers to FinCEN.

As an analyst, I’ve noticed a growing trend in the cryptocurrency sector regarding regulatory actions. FinCEN’s proposal and the Department of Justice’s escalating enforcement actions against services like Tornado Cash and Samourai Wallet have raised concerns within the industry about a potential ban on crypto mixing in the United States. However, it is important to clarify that the U.S. Treasury has denied any such intention.

In simpler terms, Nelson explained that the proposal isn’t meant to forbid mixers but rather aims to promote greater openness and clarity.

Nelson expressed understanding towards cryptocurrency users’ quest for financial confidentiality, yet advocated for collaboration between the industry and the Treasury to develop methods that strengthen privacy without facilitating terrorist funding.

As an analyst, I recognize the nuanced distinction between obfuscation and anonymity-enhancing services in the context of public blockchains from my perspective. While both methods serve the purpose of preserving privacy, they operate differently. Obfuscation involves making data difficult to understand or interpret, while anonymity enhancers focus on concealing the identity of the transaction initiator or participant. I fully acknowledge the importance of maintaining a certain level of privacy in blockchain transactions. To that end, I am committed to collaborating with industry players to identify and develop effective tools for improving privacy in a transparent and compliant manner.

As an analyst, I’ve noticed that a significant number of mixers in the market are not primarily designed to protect users’ privacy, but rather to bypass anti-money laundering (AML) and know-your-customer (KYC) regulations. This characteristic makes them highly desirable for malicious actors, including those from North Korea.

Nelson explained that it’s not mandatory for everyone to identify every party involved in a transaction, but rather ensuring that no one, including VASPs (Virtual Asset Service Providers), unintentionally support organizations like Hamas or North Korea’s weapons programs.