Crypto industry experts provide insights into FinCEN’s proposed regulation of privacy-enhancing crypto mixers amid efforts to combat crypto-funded terrorism.
- The surprise attack on Israel by Hamas has put a spotlight on terrorism funding via cryptocurrencies after reports emerged indicating researchers who study Hamas’s financing said crypto remains one of a number of tools the group uses to raise funds.
“FinCEN is proposing to apply section 311 of the Patriot Act against basically all types of crypto privacy, including on noncustodial methods,” Alden tweeted. “Notably, if successful , it would be a big extension of their mandate to apply that section to a ‘class of transactions’ rather than to any particular custodial entity. Certain types of math/software would become illegal/sanctioned.”
“These additional requirements will be effectively barring startup innovators from improving financial access globally,” he said. “If only the largest exchanges will be able to comply, capital will concentrate into a ‘Honeypot’ to be ripe for even larger hacks that were the source of terrorist funding, to begin with.”
Shipkevich started the conversation by saying, “I give a lot of credit to FinCEN for being a very intelligent and ahead-of-its-time federal agency in proposing these types of rules that are significantly ahead of other federal agencies.” “I’m hoping that this will not be a controversial proposal,” he said. “It’s great to see this from both an academic and practitioner point of view.”
“I wonder if some of the comments will cover whether the covered institution will actually have access to some of this information, whether they'll know what CVC mixer was used, and what wallet addresses are used,” he said. “That's to be determined. And I'm curious to see whether some of the commentaries will actually include comments that discuss whether that’s even possible.”
If they are not able to get that information, that could defeat some of the purpose of this proposal, he said. “You don’t have that same infrastructure in place with crypto because of the anonymity and the way these accounts can be set up in the Omnibus,” he said. Shipkevich said he is curious to see if, at some point, there will be a cohesive and concerted effort by multiple governments to establish some general standards, saying that is the one piece that is missing to take crypto mainstream.
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