The US Treasury Department is preparing to impose a comprehensive ban on tools that provide privacy for cryptocurrency transactions.
Andrea Gakki, director of Financial Crime Enforcement Network (FINCEN), announced this week in Congress that the “mixer rules” had reached its final stage. Regulations banning software and methods of cryptocurrency trading that use the Patriot Act to enhance privacy are currently in the final stages.
The Patriot Act, enacted in 2001 after the September 11 attack, gave the government a wide range of surveillance and investigation powers. Over the years, the law has strengthened the “know your client” (KYC) and the anti-money laundering (AML) framework of the financial system. These authority is now extended to digital assets.
The “mixer rules” that the Ministry of Finance is working on categorizing not only cryptocurrency mixers, but also a number of chain transactions that can provide privacy as “major money laundering concerns.” These include:
- Combine or split funds from multiple wallets or accounts
- Split transactions into parts and forward them over a chain
- Create a disposable wallet or address
- Exchanges between cryptocurrency
- Apply user-inducing delays to transactions
Experts point out that these definitions are very broad and could even lead to legal users suspected of committing a crime. Citing federal crimes that destroy transactions into small pieces known as “smurfing” of traditional finance, they suggest that similar criminal liability can be extended to cryptocurrencies.
At the same time as Fincen’s work, special measures have been revived to combat modern threat laws, which were previously thought to have died in Congress. Representative Zach Nun confirmed that the bill is still under discussion.
The regulations could grant the Treasury the authority to ban all crypto transactions verified through foreign, exchanges, and even overseas miners without the need for a public due process. Critics argue that such authority could lead to the complete withdrawal of US banks’ crypto exchanges from global transactions, a “authoritarian approach.”
Representatives from the cryptocurrency industry believe that a complete ban on privacy software will be at a disadvantage not only for criminals but also for individuals seeking protection from oppressive regimes. The direction the US will tackle final regulations will become clear in the coming weeks.
*This is not investment advice.
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