Under the Biden Administration, FinCEN, the agency that writes and enforces U.S. anti-money laundering rules, proposed a rule aimed at cracking down on the use of foreign cryptocurrency mixers (Convertible Virtual Currency mixing services in money laundering parlance). Mixers obscure the source, destination, or the amount of a crypto transaction. That makes them a go-to tool for ransomware gangs, sanctions evaders, corrupt officials, and drug traffickers (here).

U.S. law requires anyone taking custody of customers’ funds — as mixers must do to mix — to register with FinCEN and verify customers’ identities. This defeats the purpose of mixing. As a result, no U.S. company openly operates a mixer, and those who have run one covertly have been prosecuted for money laundering and related federal crimes.

But while many countries are cracking down on mixers, not all are. So Americans with something to hide can still find a foreign service to route their crypto through.

To make that less likely, the Biden-era proposal would have required any U.S. financial institution to report within 30 days of detection any transaction it “knows, suspects, or has reason to suspect” involved mixing in a foreign jurisdiction. On October 6, the Trump Administration withdrew that proposal, along with a 2020 proposal requiring reporting on crypto transfers to and from self-hosted wallets (here). Both proposed rules would have made it harder for Americans, and anyone dealing in U.S. dollars, to hide their crypto dealings.

On October 8 Transparency International’s U.S. chapter sent FinCEN a strongly worded, well-argued letter urging it to reinstate the Biden-era proposals and to take further steps against the abuse of digital assets. A copy of the letter is here.