The US Treasury Department's Financial Crimes Enforcement Network (FinCEN) has classified cryptocurrency mixers as a significant hub for money laundering activities. This action aims to increase scrutiny of crypto transactions due to the increasing use of digital assets in money laundering and terrorist financing.

FinCEN has raised issues related to cryptocurrency mixing, terming it a "primary money laundering concern." This decision was influenced by recent events, including the Hamas' attack on Israel, which raised suspicion about the increasing use of convertible virtual currencies in illicit activities.

FinCEN Proposes New Measures against Crypto Mixers

As a response, FinCEN has proposed new record-keeping and reporting requirements on domestic financial institutions and agencies for transactions involving crypto mixers. These platforms are a haven for digital asset holders seeking to conceal their cryptocurrency transactions.

Andrea Gacki, the Director at the FinCEN, said: "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 Money Laundering Money laundering is a blanket term to describe the process by which criminals disguise the original ownership and proceeds of criminal conduct by making such proceeds appear to be derived from a legitimate source.Money laundering is an issue that traverses countless industries and sectors, which includes the financial services space. Though criminal money may be successfully laundered without the assistance of the financial sector, billions of dollars’ worth of criminally derived money are laund Money laundering is a blanket term to describe the process by which criminals disguise the original ownership and proceeds of criminal conduct by making such proceeds appear to be derived from a legitimate source.Money laundering is an issue that traverses countless industries and sectors, which includes the financial services space. Though criminal money may be successfully laundered without the assistance of the financial sector, billions of dollars’ worth of criminally derived money are laund Read this Term concern, and, just as with our efforts in the traditional financial system, Treasury will work to identify and root out the illicit use and abuse of the CVC ecosystem."

Cryptocurrency Mixers Facing Regulatory Scrutiny

Last year, the US imposed sanctions on Tornado Cash, a cryptocurrency mixing service at the center of controversy over alleged money laundering activities. This move by the US Department of the Treasury's Office of Foreign Assets Control (OFAC) sparked a discussion on the impact of these sanctions and the challenges they pose to decentralized technologies.

According to OFAC, as of last year, over $7 billion has been laundered using Tornado Cash since 2019. These sanctions effectively prohibited US crypto investors from utilizing Tornado Cash, as 38 Ethereum addresses and 6 USDC addresses had reportedly been added to OFAC's Specially Designated Nationals list.

It's worth noting that FinCEN had previously taken steps to restrict US residents' use of Tornado Cash in August 2022. This action led to a legal challenge by individuals supported by the crypto exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term Coinbase, and the case was ruled in favor of the agency in August 2023, Coindesk reported.