A new legislative proposal in the United States House of Representatives, known as the Blockchain Integrity Act, seeks to impose a two-year moratorium on the operation of cryptocurrency mixers. Spearheaded by Representative Sean Casten and four other Democratic congress members, the bill aims to curb the anonymity provided by these services, which can obscure the origin of cryptocurrency transactions. As described by Casten, crypto mixers facilitate the creation and withdrawal of funds to new addresses, disconnecting the link between transactional addresses.
Implications for Financial Entities
Under the proposed legislation, financial entities such as crypto exchanges and other regulated financial service providers would be barred from accepting or distributing funds via crypto mixers. Violations of the law could lead to steep penalties, with fines reaching up to $100,000 per incident. This would enforce a stricter compliance environment across financial platforms dealing with cryptocurrencies.
Assessing the Impact
The bill also mandates the Treasury Department to conduct a comprehensive study during the ban period. This study is expected to cover various aspects, including the proportion of mixer transactions linked to illicit activities, potential legitimate uses of crypto mixers, and the ability of law enforcement to monitor and interfere with illegal transactions. Additionally, the report will compare regulatory strategies concerning crypto mixers across different global jurisdictions.
Concrete User Inferences
- Financial institutions might need to enhance their monitoring systems to comply with new regulations.
- Investors should be cautious with mixer-linked transactions as these could soon be under legal scrutiny.
- Crypto service providers will have to adapt their business models to avoid heavy penalties and legal challenges.
The proposal has gathered support from other congress members, including Bill Foster, Brad Sherman, and Emanuel Cleaver, who have expressed concerns about the misuse of cryptocurrencies in illegal activities such as tax evasion and terrorism financing. Previously, the US had taken similar actions, like blacklisting addresses associated with Tornado Cash by the Treasury’s Office of Foreign Assets Control. The regulatory landscape is tightening, as evident from actions against other mixers like Monero following the EU’s new Anti-Money Laundering laws.