FinCEN’s Proposal of Special Measure Regarding Convertible Virtual Currency Mixing, as a Class of Transactions of Primary Money Laundering Concern would criminalize Bitcoin privacy tools under the suspicion of money laundering. The proposal cites Section 311 of the USA PATRIOT Act, which enables the bulk collection of data by intelligence agencies.

If FinCEN has its way, all regulated entities will have to provide customer data for funds suspected to have interacted with “mixing” tools and services to federal agencies, and could go as far as including the use of the Lightning Network as a reportable act. To understand the motivation for FinCEN’s proposal, we need to look at the…

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