- FinCEN has proposed categorizing crypto mixers as facilitators of money laundering
- US individuals and businesses will find it much harder to interact with mixers
The US is targeting Islamic Jihad, Hamas, and other terrorist groups by proposing strict regulations on privacy mixers like Tornado Cash. Allegedly, mixers can support terrorism by obfuscating the source of funds.
The US Treasury’s Financial Crimes Enforcement Network (FinCEN) has proposed categorizing crypto mixers as facilitators of money laundering, in line with views that they are a threat to national security, media source Tech Report wrote.
This is a continuation of the government’s efforts to curtail mixer activity. In May 2022, Bankless Times wrote that OFAC enforced sanctions against crypto mixer Blender.io for its part in laundering funds from the Ronin Bridge hack. According to OFAC, the mixer processed $20.5 million of around $620 million stolen from Axie Infinity as ether and USDC.
Rules hinder legitimate use of mixers
Pending agreement between the public and legislators, US individuals and businesses will find it much harder to interact with such services. Under the new rules, many of these mixers would be labeled as enablers of money laundering, especially those outside US jurisdictions.
Due to the mixers’ capacity to fund terrorism, they would be considered national security threats in line with the Patriot Act’s Section 311.
With the new rules, financial institutions will have to provide additional documents and face reporting requirements. The US Treasury could even ban crypto exchanges from processing funds that passed through these mixers.
Palestinian terrorists received crypto worth $132M
According to insiders, the Palestinian Islamic Jihad received $91 million and Hamas garnered $41 million in crypto over two years. The actual sums that reached them are unknown.
Unsuccessful efforts
The US has tried to shut down several crypto mixers for helping hackers from North Korea, Russia, and other sanctioned countries.
Their efforts haven’t been very successful, however. A North Korean Ethereum wallet, implicated in the above-mentioned crypto hack of the Ronin Bridge, laundered stolen ether despite the sanctions.
Through theft and extortion, North Korean hackers and Russian ransomware syndicates have received a lot more assets than Palestinian terrorists via mixers.
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