Blockchain Association Submits Comments to FinCEN’s Proposed Convertible Virtual Currency Mixing Rule

Washington, D.C. (Jan. 22, 2024) – Today, Blockchain Association submitted a letter in response to the request for comments by the Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) on its Proposal of Special Measure Regarding Convertible Virtual Currency Mixing (“Proposal”). While the Association shares the concern and focus of FinCEN to combat illicit finance, especially concerning digital assets, we believe that the Proposal defines “CVC mixing” far too broadly and provides insufficient analysis and data as to such a broad application. The Proposal ignores legitimate uses of such mixers and would apply overly-broad and burdensome requirements on users, driving digital assets businesses to less regulated markets where U.S. law enforcement would have little to no access to valuable information.

We implore FinCEN to reconsider the Proposal on several fronts. First, we urge FinCEN to adequately consider the many legitimate uses of such mixing, taking into account the harm that would entail to legitimate users when finalizing the Proposal. Second, FinCEN must dramatically narrow the definition of “CVC mixing” to comply with statutory obligations and principles of fair notice. Third, we believe that the proposed measure is unnecessary, as existing suspicious-activity-reporting regulations already require financial institutions to report the transactions of principal concern to the agency. Finally, we believe that FinCEN would exceed specific geographic limits for imposing such a rule; Section 311 authorizes it to target a class of transactions within specific jurisdictions, not the entire globe.

The following statement is attributed to Blockchain Association Head of Legal Marisa Coppel:

“FinCEN’s Proposal is far too broad in scope and application, and fails to provide sufficient data and analysis backing up such breadth. The definition of “CVC mixing” includes a wide array of legitimate – legal – activity, and we urge FinCEN to ensure any final regulation does not reach such activity. In finalizing the Proposal, FinCEN must act within the scope of their authority and abide by APA requirements.”