The US Treasury has boarded the crypto regulation bandwagon. Recent years of crypto development have increased the wave of innovations in financial inclusion. These current developments in the crypto community have increased the scrutiny of digital assets. Recent reports on the US Treasury show the interest of the organization in increasing regulations on crypto mixers.
The main issue under review is the illegal activities associated with crypto, including tax evasion and money laundering. In addressing these concerns, the US Treasury seeks to target regulations on these tools used in anonymizing transactions after its continuous negative view of digital currencies.
US Treasury crypto mixtures regulations
Crypto mixtures also referred to as cryptocurrency tumblers or the mix services that enable users to enhance their crypto transactions privacy. They take multiple inputs from users, blend them, and return coins to the respective users.
This makes it difficult to trace the digital assets’ origin. Despite being invented for legitimate purposes, this invention can also be used in criminal activities. This has caught the eye of regulatory authorities and prompted them to act.
The US Treasury refers to crypto mixtures as Convertible Virtual Currency Mixing Services (CVCMS). Following the report by Notice of Proposed Rule Making (NPRM) that was submitted by FinCEN, the organization seeks to outlaw crypto mixtures completely.
CVCs are designed to serve as money laundering services that are used in funding illicit activities. They build this report on the recent happenings in the crypto space, including the Bitzlato exchange takedown as well as the Axie Infinity heist.
FinCEN’s director, Andrea Gacki, stated on the NPRM proposal that targeted crypto mixtures, commenting that they would be the first to implement the Section 311 Authority against the entire transaction services.
The regulation was only applicable to individual companies up until the recent announcement. These included private companies, regions, and banks, including Bitzlato, Andorran Bank, and North Korea respectively.
CVC mixing offers a critical service that allows players in the ransomware ecosystem, rogue state actors, and other criminals to fund their unlawful activities and obfuscate the flow of ill-gotten gains. This is FinCEN’s first-ever use of the Section 311 authority to target a class of transactions of primary money laundering concern, and, just as with our efforts in the traditional financial system, US Treasury will work to identify and root out the illicit use and abuse of the CVC ecosystem.US Treasury
Section 311 of the Patriot Act is a framework that is used in controlling Bank power on privileges from various types of accounts or classes of transactions. As such, the US Treasury has shown interest in CVCs that have initially raised money laundering concerns.
The regulation targets such services and has the power to cut off the platforms from the global banking system, and this, in turn, hinders their ability to offer financial services.
Impact of the regulation
The need for regulation has been brought about by the rising growth of the crypto industry that gives way to criminal opportunities based on the pseudonym nature of the transactions. As the crypto mixtures provide an extra layer of privacy, making it a challenge for law enforcement to track and combat these cybercrimes.
Purposely, the regulation is to be implemented in Ireland to strike a balance between preserving the security and privacy of law-abiding crypto users and preventing the misuse of the crypto technology. Regardless of the US Treasury regulation entity trying to implement the frameworks, its decision has spread controversies in the crypto community.
Among them is concern about potential drawbacks, including overregulation and the impact on decentralized finance (DeFi). Also, despite the implementation of the regulations, tech-savvy criminals can still find vulnerabilities in the crypto networks and still cause harm. As such, the decision might greatly affect other users apart from the intended culprits.