The Financial Crimes Enforcement Network (FinCEN) solicited comments from the public regarding proposed policies that endanger private Bitcoin usage in America. Our comment urges a different approach.
The Bitcoin Policy Institute has officially submitted a comment to the Financial Crimes Enforcement Network (FinCEN) in response to its recent proposal concerning the regulation of Convertible Virtual Currency (CVC) mixing. Our comment underscores the importance of distinguishing between unlawful activities and the legitimate use of digital currencies for privacy and innovation.
FinCEN's proposed definition of "CVC mixing" aims to prevent money laundering but is so broad that it may inadvertently capture a range of legitimate financial technologies and behaviors. Services like noncustodial coinjoin transactions and layer-2 protocols, which are critical for maintaining user privacy and scaling Bitcoin, could be affected by this sweeping definition.
We at BPI believe that privacy in financial transactions is necessary for a democratic society and deeply rooted in Constitutional rights. The current proposal, however, could impose disproportionate surveillance on ordinary transactions, infringing upon these rights and risking American leadership in technological innovation.
Practical implications of the proposed regulation are concerning. For example, without basic privacy tools, a single purchase using Bitcoin could expose the buyer's entire financial history to a merchant. Moreover, for marginalized communities, the ability to conduct private transactions is not just a matter of financial independence but often one of personal safety and survival.
We suggest a recalibrated regulatory approach that respects the right to privacy while effectively targeting money laundering. This includes differentiating between high-risk and low-risk transactions, and focusing enforcement efforts on known illegal activities, rather than imposing broad, one-size-fits-all requirements.
We advocate for a sensible balance that promotes economic competitiveness and protects individual freedoms, ensuring that the U.S. remains a leader in digital asset innovation. BPI welcomes the opportunity to engage further with FinCEN to develop regulations that support these objectives.
To read our comment letter, click here.