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US Proposes on Crypto Mixers Temporary Ban Decoding the 101

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A bill proposing a two-year ban on crypto mixers was introduced in the United States House of Representatives. The legislation, called the Blockchain Integrity Act, is sponsored by five Democratic congress members led by Sean Casten. Casten described a crypto mixer as a pool that allows users to create a new address and withdraw funds without explaining the connection between the deposit and withdrawal addresses.

What to Expect for Crypto Mixers?

The bill will temporarily prohibit financial institutions, including crypto exchanges, crypto asset service providers, and other registered money service businesses, from accepting funds passed through a mixer or allowing withdrawals directly to a mixer’s address. Each violation will be subject to a fine of up to $100,000.

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During the two-year period, the Treasury Department will prepare a report detailing a wide range of information. The report will include an estimated percentage of mixer transactions involving illegal financing, legitimate uses of mixers, law enforcement’s capacity to track or block transactions, and regulatory approaches to mixers in other jurisdictions.

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Notable Process in the US

Representatives Bill Foster, Brad Sherman, and Emanuel Cleaver became co-sponsors of the bill, which has not yet gone to committee. Sherman, who has a long history as a crypto opponent, told Casten, “The very name of cryptocurrency implies it; a kind of secret money. Terrorist groups, sanction dodgers, tax evaders, cybercriminals, etc., all use mixers to hide their illegal activities.”

The United States had previously taken action against crypto mixers. In August 2022, the Treasury’s Office of Foreign Assets Control placed addresses associated with the mixer Tornado Cash on the Specially Designated Nationals list, effectively banning US citizens from using it. This move survived a court challenge a year later. The founders of this mixer are charged in the US and the Netherlands with money laundering, sanctions violations, and related crimes.

The crypto mixer Monero has also been under pressure following the implementation of the European Union’s new Anti-Money Laundering laws.

Regulatory Shift:

The United States is considering a significant move in the regulation of cryptocurrency transactions by proposing a temporary ban on crypto mixers. This development marks a pivotal moment in the evolving landscape of digital asset governance, as regulators grapple with the challenges posed by the anonymity features of certain blockchain technologies.

What are Crypto Mixers?

Crypto mixers, also known as tumblers or mixnets, are tools designed to enhance privacy and anonymity in cryptocurrency transactions by mixing coins from multiple sources. While these tools can have legitimate uses for privacy-conscious individuals, they have also been associated with illicit activities such as money laundering and the funding of criminal enterprises.

Rationale Behind the Proposal:

The proposed temporary ban on crypto mixers reflects a broader effort by regulatory bodies to strengthen anti-money laundering (AML) and know-your-customer (KYC) protocols within the cryptocurrency ecosystem. By imposing restrictions on the use of mixers, authorities aim to enhance transparency and accountability in digital asset transactions, mitigating the risks of financial crime and illicit fund flows.

Debates and Controversies:

However, the proposal has sparked debates within the cryptocurrency community, with some advocating for the preservation of privacy rights and innovation in financial technologies. Critics argue that a blanket ban on mixers could stifle legitimate use cases and hinder the development of privacy-enhancing features in decentralized systems.

Monitoring the Regulatory Landscape:

As discussions around the regulation of crypto mixers continue, stakeholders from across the industry are closely monitoring the regulatory landscape, anticipating potential implications for privacy, security, and financial innovation. Ultimately, the outcome of these deliberations will shape the future of cryptocurrency regulation and its impact on digital asset users worldwide.

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