United States to Fully Regulate Mixers! Financial Institutions Required to Report Related Transactions

The U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) has proposed new regulations that categorize Convertible Virtual Currency Mixing (CVC Mixing) involving international transactions as a type of significant money laundering activity. Financial institutions are required to report information on transactions involving mixers within U.S. or foreign jurisdictions when they are aware of, suspect, or have reason to suspect such activity.

U.S. Treasury to Fully Regulate Mixers

The rules state that due to the lack of transparency in mixers leading to serious money laundering and national security risks, it is necessary to increase their transparency to prevent illicit actors from entering the U.S. and global financial systems. This also aligns with the Treasury's long-standing efforts to combat the following activities:

• Terrorist organizations like Hamas and Palestinian Islamic Jihad that target innocent civilians with violence
• Ransomware criminals targeting critical infrastructure
• Nation-state actors such as North Korea's Lazarus Group and their supporters evading U.S. and global sanctions

To support these crucial objectives, the rule will require covered financial institutions to report information on transactions involving mixers within U.S. or foreign jurisdictions when they know, suspect, or have reason to suspect such transactions.

FinCEN Director Andrea Gacki stated:

Mixers provide a critical service, allowing participants in the ransomware ecosystem, rogue nation-state actors, and other criminals to fund their illicit activities with cryptocurrency and obscure the flow of ill-gotten gains. Just as we have done in the traditional financial system, the Treasury will work to identify and eliminate illicit use and abuse of the cryptocurrency ecosystem.

Previous Illicit Financing Actions Identified by the Treasury

The Treasury has previously taken multiple actions against illicit financing involving the use of mixer services:

• In the 2022 National Money Laundering Risk Assessment (NMLRA), it was found that many criminals use anonymizing technologies, including mixers, to help hide the movement or source of funds
• The Office of Foreign Assets Control (OFAC) identified Blender.io as providing mixer services, with North Korea using the service to launder over $20.5 million from the Axie Infinity Heist in May 2022
• OFAC identified Tornado Cash as providing mixer services and sanctioned the service
• In March 2022, OFAC identified the Lazarus Group controlled by North Korea for stealing over $455 million, the largest known virtual currency theft to date
• In January 2023, FinCEN designated the cryptocurrency exchange Bitzlato Limited as related to illicit financial laundering in Russia, a joint action by U.S. law enforcement and foreign partners