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<p class="is-style-lead"><a href="https://crypto.news/tag/coinbase/" rel="noopener noreferrer nofollow">Coinbase</a>, Consensys, and Paradigm are urging the U.S. Treasury to reconsider its proposed reporting requirements for crypto mixer transactions, citing a lack of specificity and concerns over resource allocation.</p>
<p>In a <a href="https://assets.ctfassets.net/c5bd0wqjc7v0/68ReA5Fygo9vUHcc1JzM0F/1ac7e172b64b881f6713ee94bf2f078e/Coinbase_Response_to_NPRM_re._Mixing.pdf" target="_blank" rel="noopener noreferrer nofollow">comment </a>to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) on Jan. 22, Coinbase stated that regulated platforms already comply with existing rules for recordkeeping and reporting of suspicious activities and illicit crypto mixing.</p>
<p>The firm is particularly critical of the proposal’s requirement for crypto platforms to report all crypto mixing activities, including those serving legitimate purposes. Coinbase contends that this broad approach would lead to inefficient use of resources and unnecessary bulk reporting of non-suspicious transactions.</p>
<p>Paul Grewal, chief legal officer of Coinbase, shared his thoughts in a Jan. 22 thread on X, emphasizing the need for more targeted measures. He believes a data dump without a monetary threshold is counterproductive and a waste of time and resources.</p>
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   <p lang="en" dir="ltr">We filed comments today on <a href="https://twitter.com/USTreasury?ref_src=twsrc%5Etfw" target="_blank" rel="noopener noreferrer nofollow">@USTreasury</a>’s proposed rule on crypto mixing. <a href="https://twitter.com/coinbase?ref_src=twsrc%5Etfw" target="_blank" rel="noopener noreferrer nofollow">@coinbase</a> supports effective regulations, but not bulk data collection and reporting requirements for all transactions involving any crypto mixing–even with no indication of suspicious activity. 1/6</p>— paulgrewal.eth (@iampaulgrewal) <a href="https://twitter.com/iampaulgrewal/status/1749569072340361341?ref_src=twsrc%5Etfw" target="_blank" rel="noopener noreferrer nofollow">January 22, 2024</a>
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 <p>“This is not simply a misuse of VASPs’ [virtual asset service providers] finite compliance resources; it is exactly the kind of bulk reporting that Congress has explicitly discouraged.”</p> <cite>Coinbase</cite>
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<p>Grewal suggests that FinCEN should instead offer specific guidance to help exchanges meet their existing obligations to report suspicious activity involving mixing.</p>
<p>You might also like: <a href="https://crypto.news/unveiling-the-shadows-fincens-crackdown-on-crypto-mixers/" rel="noopener noreferrer nofollow"> Unveiling the shadows: FinCEN’s crackdown on crypto mixers </a></p>
<p>FinCEN’s proposed rulemaking, announced last October, aims to increase transparency around crypto mixing activities. While recognizing the legitimate and innovative uses of crypto mixing, FinCEN expressed concerns over its potential for money laundering by illicit actors, including North Korean hackers and Russia-based ransomware attackers.</p>
<p>To mitigate these concerns, Coinbase proposed introducing a threshold to eliminate the reporting of minor transactions and recommended focusing on recordkeeping over reporting to reduce privacy and security risks.</p>
<p>Under the proposed rules, the mixing of convertible virtual currencies would be classified as a “primary money laundering concern.” The classification affects not just dedicated tumblers like Tornado Cash but also service providers using basic privacy protocols. Financial institutions would be required to maintain records and reports related to transactions involving digital asset tumblers, imposing KYC, AML, and CFT requirements on operators of these services.</p>
<p>FinCEN’s rulemaking is based on Section 311 of the USA Patriot Act, which authorizes the Treasury Secretary to identify and take special measures against entities seen as “primary money laundering concerns.”</p>
<p>In addition to Coinbase, <a href="https://crypto.news/tag/consensys/" rel="noopener noreferrer nofollow">Consensys</a>, an Ethereum software solutions firm, has also expressed concerns about the reporting requirements. In a letter dated Jan. 22, they addressed FinCEN, suggesting the need for a security solution that effectively balances the preservation of privacy.</p>
<p>“If this has to happen, then please make it narrow enough not to do real damage to the ecosystem and its users,” it stated.</p>
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   <p lang="en" dir="ltr">Today, <a href="https://twitter.com/Consensys?ref_src=twsrc%5Etfw" target="_blank" rel="noopener noreferrer nofollow">@Consensys</a> submitted a letter to FinCEN concerning its proposal to have regulated financial intermediaries surveil and report activity relating to crypto token mixers. TLDR: if this has to happen, then please make it narrow enough not to do real damage to the ecosystem… <a href="https://t.co/0ESJyRQJaG" target="_blank" rel="noopener noreferrer nofollow">pic.twitter.com/0ESJyRQJaG</a></p>— Bill Hughes : wchughes.eth 🦊 (@BillHughesDC) <a href="https://twitter.com/BillHughesDC/status/1749595219627016510?ref_src=twsrc%5Etfw" target="_blank" rel="noopener noreferrer nofollow">January 23, 2024</a>
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<p>Similarly, the Blockchain Association responded to FinCEN, critiquing the overly broad definition of ‘CVC mixing’ in the proposal. It argued that the proposal lacked sufficient evidence to justify such an expansive interpretation.</p>
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   <p lang="en" dir="ltr">Today, <a href="https://twitter.com/BlockchainAssn?ref_src=twsrc%5Etfw" target="_blank" rel="noopener noreferrer nofollow">@BlockchainAssn</a> submitted comments to <a href="https://twitter.com/fincen?ref_src=twsrc%5Etfw" target="_blank" rel="noopener noreferrer nofollow">@FinCEN</a>’s proposed convertible virtual currency mixing rule. The Proposal ignores legitimate uses of <a href="https://twitter.com/hashtag/mixers?src=hash&amp;ref_src=twsrc%5Etfw" target="_blank" rel="noopener noreferrer nofollow">#mixers</a> &amp; would apply overly-broad requirements on users, driving <a href="https://twitter.com/hashtag/digitalassets?src=hash&amp;ref_src=twsrc%5Etfw" target="_blank" rel="noopener noreferrer nofollow">#digitalassets</a> to less regulated markets.<br><br>📎<a href="https://t.co/CyrkGOzhHf" target="_blank" rel="noopener noreferrer nofollow">https://t.co/CyrkGOzhHf</a>…</p>— Dan Spuller (@DanSpuller) <a href="https://twitter.com/DanSpuller/status/1749554401746788748?ref_src=twsrc%5Etfw" target="_blank" rel="noopener noreferrer nofollow">January 22, 2024</a>
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<p>Paradigm, a venture capital firm focused on crypto, also filed a response. It <a href="https://twitter.com/RSSH273/status/1749514124009304473" target="_blank" rel="noopener noreferrer nofollow">expressed </a>its opinion that the proposed rule fails to adequately address FinCEN’s concerns. Coin Center, another key player in the space, <a href="https://crypto.news/coin-center-challenges-fincens-rules-on-crypto-mixing/" rel="noopener noreferrer nofollow">described </a>the rulemaking as both unprecedented and excessively broad.</p>
<p>On a related note, Coinbase’s Chief Legal Officer, Paul Grewal, publicly expressed his criticism of a recent crypto report by the US Government Accountability Office (GAO) on Jan. 22. Grewal <a href="https://crypto.news/coinbases-grewal-scrutinizes-us-gaos-report-on-cryptos-role-in-sanctions-evasion/" rel="noopener noreferrer nofollow">accused </a>the report of being sensationalistic, emphasizing the lack of comparative and analytical depth in its approach. He questioned the rationale behind the GAO’s criticism of the crypto industry, especially considering the industry’s substantial investments in legal compliance.</p>
<p>The GAO report, spanning 63 pages, highlighted concerns about digital assets being potentially used to circumvent economic sanctions. It specifically noted that assets like Bitcoin could be utilized by <a href="https://crypto.news/tag/sanction/" rel="noopener noreferrer nofollow">sanctioned </a>entities to obscure their transactions. This report has added another layer to the ongoing debate around the role and regulation of cryptocurrencies in the global financial system.</p>
<p>Read more: <a href="https://crypto.news/fincens-crypto-mixing-reporting-for-banks-poses-disruptive-risks-lawyers-say/" rel="noopener noreferrer nofollow"> FinCEN’s crypto mixing reporting for banks poses ‘disruptive’ risks, lawyers say </a></p>

Coinbase, Consensys, others critique US Treasury’s proposed bulk reporting for mixer transactions

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