May 07, 2024

Casten, Foster, Sherman, Cleaver Introduce Legislation to Temporarily Prohibit Crypto Mixers

Washington, D.C. — Today, U.S. Congressman Sean Casten (IL-06) introduced the Blockchain Integrity Act to temporarily prohibit financial institutions from transacting with funds that have gone through digital asset mixers while the Treasury Department, Securities and Exchange Commission (SEC), Commodity Futures Trade Commission (CFTC), and Department of Justice (DOJ) conduct a study on their illicit uses.

The legislation is co-sponsored by Reps. Bill Foster (IL-11), Brad Sherman (CA-32), and Emanuel Cleaver (MO-05).

Text of the Blockchain Integrity Act can be found here.

“Digital asset mixers are key to allowing illicit actors to instantaneously move massive amounts of money around the globe for criminal purposes without detection,” said Congressman Casten. “Cryptocurrency has been used to finance terrorist attacks around the world. Half of North Korea’s nuclear program is funded through cryptocurrency theft made possible by mixers. A temporary ban while we study this technology will help us better understand how it is used for illicit purposes, prevent future crypto-funded terrorism, and inform future policymaking.”

“Digital asset mixers and other anonymity-enhancing technologies help terrorist groups, state actors, and criminals cover their tracks as they carry out financial crimes that undermine the security of the United States,” said Congressman Foster. “This legislation would help prevent financial institutions from facilitating transactions involving digital assets that have been routed through mixers and put Congress and our regulatory partners in a better position to develop policies to curb the abuses of emerging money laundering tools in the digital asset ecosystem.”

“Cryptocurrency’s intention is right there in its name, a form of ‘hidden money,’ and there is no tool more useful in facilitating that goal than crypto mixers. Terrorist groups, sanction evaders, tax evaders, cyber criminals, etc. all use mixers to obscure their illicit activity,” said Congressman Sherman. “This legislation is a vital first step in banning the use of crypto mixers in the United States and will help our regulators and hopefully some of my colleagues better understand the dangers mixers pose to our national security and financial system.”  

Digital asset mixers are generally used to obscure otherwise transparent blockchain transactions, where various entities will deposit crypto-assets to a mixer address, and the mixer acts as a pool. Users who have contributed to the pool can then generate a new address and withdraw their funds without revealing the link between the depositor and withdrawal addresses. Criminals will typically move their funds through mixers or other anonymized services prior to swapping them for U.S. dollars or other fiat currencies at exchanges or financial institutions. For example, Binance, the largest cryptocurrency exchange in the world, processed more than $275 million in deposits from Bestmixer before Dutch authorities shut it down for money laundering in 2019. 

The Blockchain Integrity Act would place a two-year moratorium to prohibit financial institutions, including cryptocurrency exchanges, virtual asset service providers (VASPs), and other registered money service businesses (MSBs), from accepting incoming funds that have been routed through a mixer, as well as prevent outgoing funds from being withdrawn directly to a known mixer address.

During this moratorium, the legislation directs the Treasury Department, SEC, CFTC, and DOJ to conduct a study on digital asset mixers, privacy coins, and anonymity-enhancing technologies, including providing statistics on their illicit uses, information about legitimate uses, and tailored legislative recommendations to address illicit uses by specific bad actors.

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