The cryptocurrency community is actively opposing the proposed rule of the US Department of the Treasury (TREAS) via the Financial Crimes Enforcement Network (FinCEN) to generally outlaw convertible virtual currency (CVC) mixing or crypto mixers. The primary points of contention lie in the constitutionality and clarity of the planned regulation.
FinCEN’s Proposal Against Crypto Mixers
Without delving too much into the intricacies of the legal framework that FinCEN is trying to enforce, the current disagreement between the industry players and the regulators is on the subject of classifying cryptocurrency transactions using mixers as primary money laundering concerns (PMLC).
FinCEN’s Section 311 (31 U.S.C. 5318A) power given by Congress allows the agency to target an entire class of transactions as a PMLC. For the past 23 years since its enactment, the regulator has been very careful in making decisions anchored to it because of its potential repercussions. So, when it targeted specific crypto transactions employing virtual currency mixers as illegal, the crypto community was naturally livid about the move.
Among the parties who submitted their opposition to the restriction pushed by FinCEN were Coin Center and Samourai Wallet through The Crypto Lawyers group. According to them, the agency should exercise caution and either withdraw or narrowly tailor the proposed rule based on the issues they raised.
First of all, the parties cited the lack of legal precedent in the sudden imposition of the ban focusing on a particular crypto transaction. They also argued against the broad scope of the prohibition, which failed to distinguish between the legitimate exercise of privacy measures and attempts to mask illegal activities.
They claim that these could leave room for misinterpretation in its application, which could victimize entities or individuals who may unintentionally get ensnared by the activity falling under the PMLC designation. The decree likewise impinges on the right of crypto users to protect their transactions from criminal elements and fishing expeditions organized by regulatory bodies.
Moreover, the critics pointed out FinCEN’s failure to differentiate the application of the rule between foreign and domestic transactions. They said this could potentially lay the ground for unnecessary scrutiny and reporting requirements of a wide range of domestic activities involving cryptos.
Furthermore, the parties complained about such an exercise of FinCEN exceeding its authority under the PATRIOT Act.
The opposition highlighted that FinCEN already has enough power granted by the law to conduct surveillance on individuals or organizations suspected of conducting illegal activities without invading people’s right to privacy. Therefore, they see no more need to further widen the scope of the government body at the expense of the safeguards granted by the US Constitution and statutes to protect the privacy interests of individuals.