- FinCEN tightens scrutiny over Swan Bitcoin customers using crypto mixers.
- Swan Bitcoin supports financial privacy.
- The company CEO expressed a willingness to take on the government agency.
The cryptocurrency movement was founded with privacy and permissionless transacting in mind. However, due to open blockchain ledgers, some within the community have turned to crypto mixers to obfuscate the flow of funds in a bid to preserve their privacy. This has led to concerns among authorities that crypto mixers enable money laundering and circumvention of KYC restrictions.
The latest battleground in this fight is the Financial Crimes Enforcement Network (FinCEN) targeting the Swan Bitcoin platform. It emerged that FinCEN is pressuring Swan Bitcoin to comply with freezing the accounts of customers who use mixer services, leading to concerns among the community that their privacy is at risk.
In response, Swan Bitcoin CEO Cory Klippensten is considering what to do next, including taking legal action against the government agency.
Swan Bitcoin CEO Considers Options
Regarding the FinCEN situation, Klippensten took to 𝕏 stating that he intends to discuss the situation with banks to gauge their views on the matter, adding that legal action against the government agency is also a possibility.
The Swan Bitcoin CEO advised customers who do use mixer services not to withdraw funds from the platform directly to a crypto mixer, otherwise, there is the risk that the company’s banking partners may freeze bank accounts.
This crackdown traces back to FinCEN contacting Swan Bitcoin about mixer usage by some customers. Company co-founder Yan Pritzker said Swan Bitcoin doesn’t oppose mixers, having published guides encouraging their use. However, their banking partners are governed by FinCEN rules and are mandated to freeze suspicious accounts.
Pritzker explained the current climate has spawned fear in banks about crypto, making it easier to cut off mixer-linked accounts than to investigate activity to prove the legitimate use of mixers for non-illicit purposes. With few banks left willing to work with crypto firms, Pritzker stressed that the company must balance its principles with retaining crucial banking access.
Crypto Mixers are Not Illegal
This clampdown which ultimately results in being cut off from banking access stems from anti-money laundering standards set by the Financial Action Task Force (FATF). FATF guidelines call for close monitoring of crypto service providers, including the collection of sender and recipient details of cryptocurrency transfers.
Crypto mixers themselves are not explicitly illegal. However, under the Bank Secrecy Act, custodial mixers that hold user funds are required to register with FinCEN, operate an anti-money laundering and know-your-customer program, and comply with relevant reporting and record-keeping requirements, which most custodial mixers do not adhere to.
On the Flipside
- FinCEN‘s actions are an infringement on personal privacy, which is a fundamental human right enshrined in the Universal Declaration of Human Rights.
- Although Klippensten is considering legal action, court battles with government agencies are costly and lengthy with uncertain outcomes.
- Just 0.24% of crypto transactions in 2022 relate to illicit activity, making enforcement actions against crypto companies that support privacy a poor use of limited government resources.
Why This Matters
There is no simple solution that would satisfy maintaining one’s on-chain financial privacy. While privacy is a human right, that in itself can be used to provide cover for criminals. In any case, mainstream acceptance of cryptocurrency will only come through compliance, making wider adoption a double-edged sword.
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