Coinbase Takes a Stand: Critiques US Treasury's Crypto Mixing Rules, Urges Reconsideration for a Fair Approach!

Coinbase has submitted a comment to the US Treasury's Financial Crimes Enforcement Network (FinCEN), expressing concerns and suggesting reconsideration of the proposed rules on cryptocurrency mixing. The comment addresses issues related to regulatory gaps, excessive data demands, and the absence of a monetary threshold for reporting.

Existing Regulatory Obligations:

• Coinbase argues that regulated crypto platforms are already subject to recordkeeping and reporting rules regarding suspicious activities and illicit crypto mixing. The proposed rules, according to Coinbase, do not adequately address the existing regulatory framework.

Inefficiency of Reporting All Crypto Mixing Activities:

• The proposed requirement for crypto platforms to report all crypto mixing activities, regardless of their legitimacy, is deemed inefficient by Coinbase. The company suggests that reporting every transaction without a monetary threshold could lead to a bulk reporting of non-suspicious transactions, contradicting Congress's stance on avoiding such data dumps.

Need for Specific Guidance:

• Coinbase recommends that if the Treasury wants to address the issue of crypto mixing, it should assist exchanges in meeting their existing obligations to report suspicious activity involving mixing. Specific guidance, according to Coinbase, is more effective than mandatory bulk reporting rules.

Privacy and Security Concerns:

• Coinbase suggests that instead of reporting, FinCEN should consider requiring recordkeeping at most to minimize privacy and security risks associated with mandatory bulk reporting.

Eliminating Bulk Reporting of Small Transactions:

• To address the potential issue of bulk reporting of small transactions, Coinbase recommends the addition of a threshold, allowing for more efficient reporting practices.

Acknowledgment of Legitimate Uses:

• While highlighting the potential risks of crypto mixing in promoting money laundering, FinCEN has acknowledged that crypto mixing can have legitimate and innovative purposes. Coinbase suggests a more targeted and specific approach to address illicit activities without hindering legitimate uses.

As regulatory discussions continue, Coinbase's comment reflects industry concerns about the practicality and efficiency of proposed rules, emphasizing the importance of clear guidance and thresholds to avoid unnecessary reporting burdens on crypto platforms.