USA Proposes Ban on the Use of Cryptocurrency Mixers

US Senate representatives have introduced the Blockchain Integrity Act aimed at tightening regulations in the cryptocurrency sphere. The new law seeks to limit the use of cryptocurrency mixers, often employed for illicit financial activities. Led by Sean Casten and supported by other Democrats, the initiative proposes a two-year ban on the use of cryptocurrency mixers.

What are Cryptocurrency Mixers?

Cryptocurrency mixers are a type of tool that allows users to blend their cryptocurrency transactions with others, making it difficult to trace who exactly is sending money and to whom. In other words, cryptocurrency mixers help conceal the transaction trail, which can be exploited for illicit purposes such as money laundering or financing terrorist activities.

Legislative Aim

The proposed bill aims to disrupt the flow of illicit funds and promote transparency by prohibiting financial institutions, cryptocurrency exchanges, and registered financial service companies from accepting funds processed by mixers. Violations of this ban would result in civil fines of up to $100,000, serving as a deterrent against facilitating mixer-related transactions.

Treasury Department Report

Additionally, the bill mandates the Treasury Department to produce a comprehensive report during the ban period, assessing various aspects of mixer transactions, including involvement in illegal finances, legitimate use cases, law enforcement agency capabilities, and regulatory approaches in other jurisdictions.

Political Response

The proposed regulations face political challenges, especially in the House of Representatives, where Republicans hold the majority. The passage of the bill remains uncertain, as Democrats support it as a necessary measure in combating illicit finances, while Republicans express concerns about stifling innovation and the need for balanced regulatory oversight.

Previous Actions against Cryptocurrency Mixers

In addition to legislative efforts, US authorities have previously taken action against cryptocurrency mixers, evident in the Treasury Department's actions against the Tornado Cash mixer service and legal actions against mixer developers for money laundering and sanctions violations.

Concerns about Foreign-Issued Stablecoins

Furthermore, lawmakers express concerns about foreign-issued stablecoins, such as Tether, citing potential ties to illicit finances. Stablecoins pegged to fiat currencies have gained popularity as a means of facilitating transactions in the cryptocurrency ecosystem, prompting scrutiny regarding issuer transparency and regulatory oversight.

Rising Popularity of Cryptocurrency Mixers

Cryptocurrency mixers have become a focal point due to their role in obscuring transaction traces and enabling user anonymity. Recently, there has been a surge in the popularity of cryptocurrency mixers, as indicated by a report from Chainalysis, a blockchain intelligence firm. According to the report, illicit addresses accounted for 23% of funds sent to mixers in 2023, marking a significant increase from 12% in 2021. The rise in mixer usage is attributed to a doubling in the share of funds deemed illicit, which now constitute the primary driver of mixer activity.