US Government To Bring PATRIOT Act to Digital Assets i.e. Crypto Payments

General News
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TL;DR:

The Financial Crimes Enforcement Network (FinCEN) revealed that the US Treasury is finalizing a ban on privacy tools, specifically private cryptocurrency transactions, by expanding the PATRIOT Act to digital assets.

FinCEN Director Andrea Gacki confirmed that the Treasury is working on finalizing the so-called mixer rule, which uses the PATRIOT Act to prohibit private transactions in cryptocurrency.

We are seeing more and more illegal transactions being done in crypto,” Representative Liccardo claimed in the hearing, citing a study which found that out of 111 examined fraud cases, 91% allegedly involved so-called decentralized finance, or ‘DeFi’. The concern here, according to Liccardo, arises from the pseudonymity of transactions.

While Gacki stated that FinCEN was working with blockchain analysis companies to deanonymize pseudonymous transactions, Liccardo countered that software like mixers would allow users to evade even sophisticated detection techniques.

What is the “Mixer Rule”?

The Treasury’s mixer rule is not so much a mixer rule rather than a blanket ban on any software and even behavior that would grant users of public blockchains transactional privacy.

Notably, the mixer rule’s suggestions on cryptocurrency swaps, transaction delays, “splitting,” and the creation of single-use addresses, wallets, and accounts, would even put users under suspicion with the authorities, potentially ending in criminal liability – similar to how transaction structuring, sometimes also known as “smurfing,” is deemed a federal crime in traditional finance, referring to the intentional breakup of transactions to fall below the $10,000 currency transaction reporting requirement.

In traditional finance, smurfing carries a federal prison sentence of up to 5 years, even if the money transferred did not stem from illicit origins.

Banning All Cryptocurrency Transactions for non-US Jurisdictions

The Special Measures to Fight Modern Threats Act, originally introduced in 2022 by Representative Himes of Connecticut as part of the COMPETES Act, would effectively grant the Treasury the power to ban any type of transaction it deems a concern without public notice or input under PATRIOT Act authority.

“one likely scenario is that the Treasury would use this authority to prohibit U.S. banks from being involved with cryptocurrency transactions validated by miners located outside of the United States.”

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I can understand the need for financial regulation, but when banks don’t lose their license to practice after getting caught laundering hundreds of millions for drug cartels, I find the government to be extremely hypocritical. When financial institutions are corrupt, they deserve to go down. But they never do, because they are “too big to fail”.

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surprised this isn’t receiving more attention. hope i’m not stating the obvious but this would effectively criminalize the usage of monero, right? how would these regulations even be enforced? will they go after people buying monero on kraken with their credit cards, or users of decentralized exchanges like haveno, or will they not be able to do anything because this is overly broad and monero is too popular?

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This seems…dubious, is “the Rage” a reliable source? Is anyone else reporting this news?

and the creation of single-use addresses

This would effectively ban bitcoin in the US as single-use addresses are the standard best practice for keeping funds secure and all modern wallets are built around using them. Sure the government might pursue this, but the point I’m making is surely there would be better sources reporting it if this were true?

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this is from 2023 and seems related: FinCEN Proposes New Regulation to Enhance Transparency in Convertible Virtual Currency Mixing and Combat Terrorist Financing | FinCEN.gov

from the original article:

Now, FinCEN Director Andrea Gacki confirmed that the Treasury is working on finalizing the so-called mixer rule, which uses the PATRIOT Act to prohibit private transactions in cryptocurrency. At the same time, Representative Nunn of Iowa let slip that the House appears to continue to work on the Special Measures to Fight Modern Threats Act, a PATRIOT Act digital asset legislation that’s long been thought dead, which would solidify the Treasury’s use of Section 311 to prohibit specific transactions.

seems trustworthy to me imo, the link in the above paragraph leads to an official US government channel although i can’t be assed to watch the video in its entirety.

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I wasn’t referencing the reporting from 2023 about the original proposal. My questions are about the new development which is the topic of the thread. If this is suddenly moving into enforcement soon, where are the reliable sources reporting that?

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I had never heard of the rage either, so I understand your skepticism. They apparently exclusively focus on financial surveillance. In the article, they reference a 2-hour YouTube video from the Republican Financial Services channel, in which officials discussed this decision. It seems real to me.

At the same time, given how few Europeans were aware of Chat Control, and how few mainstream general news outlets covered it, I would not be surprised if a story like this also flies under the radar.

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Fair points, but my thinking is there is a lot of institutional money in bitcoin now, and that would draw some kind of mainstream media attention to this, even if not highly visible, and not critical of the changes. There was no significant money at risk from chat control, so I’m not sure they’re comparable.

This is definitely worth keeping an eye on, I would just say probably best to take it with a grain of salt for now, IMO.

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I understand where you’re coming from, but just the fact that lawmakers admit they are considering this is enough reason for concern even if it never goes through with. It’s better to try to stop them early than at a later stage.

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@PurpleDime
"Deregulate crypto! No, not like that" *regulates crypto*

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@PurpleDime
About time