Arkham

Tornado Cash

Simply

Tornado

Phoenix

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    <p>The Financial Crimes Enforcement Network (FinCEN) published a notice of proposed rule making that would escalate the mixing of convertible virtual currencies to a “primary money laundering concern.” If implemented, these new and more stringent <a rel="noopener noreferrer nofollow" title="rules" href="https://thebittimes.com/tag/rules.html">rules</a> will impact not only dedicated tumblers like <a rel="noopener noreferrer nofollow" title="Tornado Cash" href="https://thebittimes.com/tag/tornado-cash.html">Tornado Cash</a> but <a rel="noopener noreferrer nofollow" title="service" href="https://thebittimes.com/tag/service.html">service</a> providers that use basic privacy protocols like <a rel="noopener noreferrer nofollow" title="Bitcoin" href="https://thebittimes.com/tag/bitcoin.html">Bitcoin</a>’s coinjoin.</p>
    <p>FinCEN cited malicious actors’ use of crypto-mixing services to launder illicit proceeds. The bureau highlighted Hamas, Palestinian Islamic Jihad, Russian criminal groups, and the Democratic People’s Republic of Korea.</p>
    <p>The Palestinian Islamic Jihad, for example, recently received millions of Tron-based USDT. Hamas reportedly received some $450,000 in digital asset donations which Israeli authorities have since seized.</p>
    <p>The notice of proposed rule making explains FinCIN’s goals of greater compliance practices for coin mixers. It says <strong>heightened transparency will improve FinCIN’s ability to deny states like North Korea and other terrorist groups their access to US financial infrastructure</strong>.</p>
    <figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter">
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       <p lang="en" dir="ltr">Mix this, FinCEN pic.twitter.com/KP7bwR3b71</p>— Samourai Wallet (@SamouraiWallet) October 22, 2023
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      Bitcoin coin-mixing service Samourai isn’t concerned about FinCEN rule-making.
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    <p>FinCEN’s proposal could require financial institutions to keep records and reports relating to transactions involving digital asset tumblers. Simply put, the rule brings know your customer (KYC), anti-money laundering (AML), and combating the financing of terrorism (CFT) requirements to operators of crypto tumblers.</p>
    <h2 class="wp-block-heading" id="usa-patriot-act-law-since-october-2001">USA PATRIOT Act: Law since October 2001</h2>
    <p>As justification for its rulemaking, FinCEN cited Section 311 of the USA Patriot Act. Section 311 empowers the Treasury Secretary with the authority to classify “primary money laundering concerns” and <strong>require domestic financial agencies to take “special measures” against those entities</strong>.</p>
    <p>Special measures for primary money laundering concerns include:</p>
    <ul>
     <li>Prohibiting the opening or maintenance of any correspondent or payable-through accounts</li>
     <li>Verifying purpose and source of funds for payments</li>
     <li>Recordkeeping and reporting requirements</li>
     <li>Beneficial ownership disclosures</li>
    </ul>
    <h2 class="wp-block-heading" id="tornado-cash-a-case-study-in-crypto-sanctions">Tornado Cash: A case study in crypto sanctions</h2>
    <p>Previously, authorities cracked down on mixers like Tornado Cash, which is already sanctioned in the US. The Office of Foreign Asset Control (OFAC) sanctioned Tornado Cash in August 2022.</p>
    <figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter">
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      <blockquote class="twitter-tweet" data-width="500" data-dnt="true">
       <p lang="en" dir="ltr">Chain-hopping via bridges has become one of the most popular money laundering methods for illicit actors. That's been a problem for crypto investigators — until now. Meet TRM Phoenix — automated cross-chain tracing through 12+ bridges &amp; services: https://t.co/OziATjlO4P pic.twitter.com/7QsLthn180</p>— TRM Labs (@trmlabs) August 25, 2022
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      Many anonymity-seeking crypto users hop away from Ethereum.
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    <p><em>Read more: </em><em>US sanctions on Tornado Cash spark free speech protests</em></p>
    <p>The Tornado Cash sanction, of course, proved highly controversial. Several digital asset insiders claimed it was unfair to honest users who simply want privacy. Many claimed the sanction <strong>violated their free speech rights</strong>.</p>
    <p>Somebody used <a rel="noopener noreferrer nofollow" title="Tornado Cash" href="https://thebittimes.com/tag/tornado-cash.html">Tornado Cash</a> to sprinkle ETH donations into the wallets of well-known figures like Vitalik Buterin, Brian Armstrong, and Jimmy Fallon — perhaps an attempt to draw them into the debate over whether OFAC’s actions amounted to an overreach of its authority. Even Vitalik Buterin suggested a potentially more regulatory-compliant alternative using ZK proofs in a paper he co-authored.</p>
    <p>Tornado Cash’s volume <strong>declined by 85% shortly after OFAC imposed its sanction</strong>. However, the measures haven’t killed the service entirely. A recent Arkham report showed that $77 million in digital assets were sent through the Tornado Cash contract in a recent 30-day period.&nbsp;</p>
    <p>As an open-source protocol, Tornado Cash’s contract still operates on the Ethereum blockchain, making it more difficult for authorities to block entirely for as long as Ethereum is accessible.</p>
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      <blockquote class="twitter-tweet" data-width="500" data-dnt="true">
       <p lang="en" dir="ltr">Tornado Cash is still the largest crypto mixer on Ethereum, even after the August 2022 US Treasury sanctions.<br><br>$77.35M in assets flowed through its contracts on ETH Mainnet in the past 30 days. pic.twitter.com/dBpxmN1gqb</p>— Arkham (@ArkhamIntel) October 9, 2023
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      Tornado Cash still survives under sanctions, somehow.
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    <p>However, the ability to access a tumbling service doesn’t necessarily mean that using it is legal. In theory, OFAC could pursue anyone who sends funds through a sanctioned coin tumbler, even though it may have some explaining to do if it were to go after Jimmy Fallon for receiving an unsolicited donation of ETH through Tornado Cash.</p>
    <h2 class="wp-block-heading" id="h-coinjoin-services-put-on-90-day-fincen-notice">Coinjoin services put on 90-day FinCEN notice</h2>
    <p>FinCEN’s new notice of proposed rule making on digital asset mixing means that <strong>tumbling services like CoinJoin might soon become even more difficult to use legally</strong>. Moreover, operators depending on anonymizing services might have to collect, record, process, and disclose untold reams of data to the government.</p>
    <p>Unless FinCEN receives a significant number of objections as formal comments during its public comment period, its proposed rules stand a good chance of becoming enacted by treasury secretary Janet Yellen.</p>
    <p>Unsurprisingly, FinCEN justifies the new requirements by naming rogue users like Hamas and the Democratic People’s Republic of Korea. FinCEN has opened a <strong>comment period lasting 90 days after its recent publication of the notice of proposed rule making</strong> in the federal register.</p>
    <p><em>Got a tip? Send us an email or ProtonMail. For more informed news, follow us on X, </em><em>Instagram</em><em>, </em><em>Bluesky</em><em>, and </em><em>Google News</em><em>, or subscribe to our </em><em>YouTube</em><em> channel.</em></p>
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<p>Source: <a rel="noopener noreferrer nofollow" target="_blank" href="https://thebittimes.com/bitcoin-s-coinjoin-services-threatened-by-new-fincen-rules-protos-tbt67393.html">https://thebittimes.com/bitcoin-s-coinjoin-services-threatened-by-new-fincen-rules-protos-tbt67393.html</a></p>

Bitcoin’s CoinJoin services threatened by new FinCEN rules | Protos

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