The Financial Crimes Enforcement Network (FinCEN) recently proposed reporting requirements for crypto-mixing activities. In response to bitcoin the report, digital asset firms, including Coinbase, Consensys, the Blockchain Association, and others, attacked the regulator.
The FinCEN proposed rulemaking that proposes “requiring domestic financial institutions to implement recordkeeping and reporting requirements on transactions involving convertible virtual currency mixing.”
Coinbase, Paradigm Weigh In
Digital asset firms Coinbase, Paradigm, and Consensys stated that the proposed requirements were overly broad.
They urged the US Treasury to revisit its proposed reporting requirements for transactions involving crypto mixers, arguing they lack specificity and would be a drain on resources.
Burdensome, and Ineffectual Policies
On January 22, Coinbase sent a letter in response to FinCEN. The trading platform offered two key arguments to support its claim that the proposed regulations were unduly onerous, burdensome, and ineffectual.
‘Little Help’ to Law Enforcement
The only exchange publicly listed in the US contended that since regulated companies like Coinbase already file Suspicious Activities Reports (SARs) on criminal crypto mixing activities exceeding $2,000, there is no “regulatory gap” with regard to crypto mixers.
Continuing that since not all mixing actions are illegal, the new regulations would “lead to bulk reporting of data of little help to law enforcement,” which would lead to violations of privacy and be a jeopardize to security by centralizing sensitive information.
Coinbase Exec, FinCEN Oppose FinCEN’s Policies
In a January 22 thread on X, Coinbase’s chief legal officer Paul Grewal noted, “Congress has said that kind of data dump is a waste of time and resources. We agree.”
Notably, the exchange was not alone in its opposition to reporting requirements.
Ethereum software solutions provider Consensys submitted a letter to FinCEN, arguing that it should find a security solution that balances preserving privacy while adding:
“If this has to happen, then please make it narrow enough not to do real damage to the ecosystem and its users.”
On the other hand, the Blockchain Associated noted that “the proposal’s definition of ‘CVC mixing’ is FAR too broad and does not provide sufficient evidence backing up such a broad definition.”
The proposed rule “is not the appropriate tool to address FinCEN’s stated concern,” according to a response filed by the cryptocurrency venture capital firm Paradigm, while Coin Center claimed that the rulemaking was “unprecedented and exceedingly broad.”
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