Crypto industry heavyweights Coinbase, Paradigm, and Consensys are uniting to push back against the U.S. Treasury’s proposed reporting requirements for transactions involving crypto mixers. In a collective effort, they argue that the proposed rules lack specificity, are overly broad, and would be resource-draining.
Coinbase, in response to the U.S. Treasury Department’s Financial Crimes Enforcement Network’s (FinCEN) notice of proposed rulemaking, submitted a letter on January 22. The proposed rules aim to mandate domestic financial institutions to implement recordkeeping and reporting requirements for transactions involving convertible virtual currency mixing.
In the letter, Coinbase asserts that the proposed requirements are not only burdensome but also ineffective. They present two primary arguments to support their stance. First, Coinbase contends that there is no “regulatory gap” regarding crypto mixers, emphasizing that regulated entities like Coinbase already file Suspicious Activity Reports (SARs) for illicit crypto mixing activity exceeding $2,000.
Secondly, Coinbase criticizes the potential consequences of the proposed rules, stating that they would result in the bulk reporting of data of limited value to law enforcement. This, according to Coinbase, would infringe on privacy, risk security by centralizing sensitive information, and constitute a misuse of virtual asset service providers’ (VASPs) compliance resources. Coinbase’s chief legal officer, Paul Grewal, emphasized in a Twitter thread on January 22, “Congress has said that kind of data dump is a waste of time and resources. We agree.”
FinCEN had proposed recordkeeping and reporting rules in October, designating cryptocurrency mixing as an area of “primary money laundering concern.” The agency observed an increasing percentage of crypto transactions processed by mixers originating from likely illicit sources. The proposed rules aim to require domestic financial institutions and agencies to implement specific recordkeeping and reporting requirements for transactions involving crypto mixers.
In response to the proposed rules, Coinbase urges FinCEN to provide a detailed plan outlining how the crypto industry can effectively implement data collection, store it securely, and furnish necessary reports before any new rules are finalized. The industry giants emphasize the need for a comprehensive and practical approach to avoid potential pitfalls in implementation.
It’s crucial to note that the proposed rules are not yet finalized or approved. They are currently in a comment period, open to public input and potential revisions. FinCEN will consider this feedback before deciding whether to formally approve and implement the proposed rules. The collaboration between these prominent players in the crypto space signals a united front against regulatory measures they perceive as onerous and inadequately targeted.
