Coinbase: Bulk data reporting in cryptocurrency mixing rules is unreasonable

Author: Danny Park, The Block; Compiler: Songxue, Golden Finance

Coinbase stated that the U.S. Treasury Department’s proposed regulations on cryptocurrency mixing fail to adequately address regulatory gaps and require crypto Platforms provide unnecessarily large amounts of data and resources.

In comments submitted to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) on Monday, Coinbase suggested that regulated crypto platforms already have a duty to log and report suspicious activity and illegal crypto mixing trade.

Coinbase said the proposal to require crypto platforms to report all crypto mixing activities, including those with legitimate purposes, is not an efficient use of company resources. The paper also takes issue with the lack of monetary thresholds for recording and reporting.

Coinbase chief legal officer Paul Grewal wrote in an

“Congress has said this data dump is a waste of time and resources,” Grewal said.

Coinbase’s comments come in response to FinCEN’s proposed regulations in October aimed at increasing transparency in crypto mixing activities.

“This is the first time FinCEN has used its Section 311 authority to target a class of transactions primarily suspected of money laundering, and just like our efforts in the traditional financial system, Treasury will work to identify and eradicate cryptocurrencies. illegal use and abuse of the ecosystem," FinCEN Director Andrea Gacki said in a statement in October.

Potential methods

Many illegal actors, such as North Korean hackers and Russia-based ransomware attackers , used crypto mixers to conduct money laundering activities. While FinCEN said in its proposal thatthese mixers could facilitate money laundering, it also acknowledged that crypto mixing could be used for “legitimate and innovative purposes.”

“If the Treasury Department wants to focus on this issue, they should help exchanges meet their existing obligations to report suspicious activity involving commingling,” Grewal said on X . “This is what the Treasury Department has done elsewhere, andconcrete guidance is more effective than mandatory mass reporting regulations.”

Given these issues,Coinbase recommends FinCEN should set a threshold to eliminate large-scale reporting of small transactions. Coinbase also recommends requiring record-keeping at most, rather than reporting, to avoid privacy and security risks.