U.S. Treasury plans to designate crypto mixers as “money laundering concern”
- The notice of proposed rulemaking will be open to public comment for 90 days.
- The action follows the recent Israel-Palestine conflict.
The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has proposed to designate crypto mixers as “money laundering concern.”
The agency claimed the proposed rule is a “key part” of its ongoing effort to enhance transparency in the crypto markets.
The notice of proposed rulemaking will be open to public comment for 90 days. Once the period is over, the agency will study all the suggestions and bring forward the rule.
If the FinCEN is successful in sanctioning cryptocurrency mixers as a whole, the Treasury would restrict financial institutions in the U.S. from interacting with these tools.
The action follows the recent Israel-Palestine conflict.
The notice mentioned how “malicious actors” such as Hamas, Palestinian Islamic Jihad (PIJ), and the Democratic People’s Republic of Korea (DPRK) have been using crypto mixers due to their anonymous nature.
The Treasury also highlighted that it has similarly sanctioned crypto mixers, Tornado Cash and Blender.io, in the past.
Terror financing through crypto activities
On 18 October, the Treasury’s Office of Foreign Assets Control (OFAC) imposed sanctions against a Gaza-based virtual currency exchange, along with other Hamas operatives.
The Wall Street Journal (WSJ) reported last week that Hamas and PIJ have received up to $134 million in crypto since 2021, citing data from the forensics firm Elliptic and a Tel Aviv software company BitOK.
Earlier this week, a group of more than 100 US lawmakers, led by Senator Elizabeth Warren, asked two senior Biden administration officials to explain their strategy to curb the use of crypto in terrorism.
Senator Warren, along with Senator Roger Marshall, also wrote an op-ed in the WSJ. The duo argued that decentralized finance (DeFi) firms should be subject to the same anti-money-laundering rules as banks.
Meanwhile, leading blockchain analysis firm Chainalysis has claimed it had seen “overstated metrics and flawed analyses” around the use of crypto by terror groups.
It argued that contrary to popular notion, the inherent transparency in blockchain technology makes crypto transactions traceable. Therefore, it is less suitable for financing terrorism among other illicit activities.