Coinbase, a prominent player in the cryptocurrency space, has criticized the U.S. Treasury’s proposed rulemaking on cryptocurrency mixing, stating that it falls short of addressing regulatory gaps while imposing unnecessary data and resource demands on crypto platforms. Paul Grewal, Coinbase’s chief legal officer, took to the X platform to express the company’s concerns, emphasizing that while the exchange supports effective regulations, the proposed rule mandates bulk data collection and reporting for all transactions involving crypto mixing, even those with no indication of suspicious activity.
Grewal argued that there is no apparent regulatory gap to be filled, as exchanges like Coinbase are already obligated to investigate and report suspicious mixing activities. He questioned the logic behind requiring reporting of non-suspicious activity and highlighted the absence of a minimum threshold in the proposed rule. According to the exchange, the rule’s lack of a monetary threshold would lead to the bulk reporting of insignificant transactions, a practice Congress has explicitly discouraged.
Coinbase’s Concerns
The comment filed by Coinbase with the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) emphasized that if new rules are necessary, they should include a monetary threshold, focus on recordkeeping rather than reporting, and provide an extended implementation period. Additionally, Coinbase recommended that FinCEN assist virtual asset service providers (VASPs) in fulfilling their existing obligations to report suspicious activity related to crypto mixing.
Furthermore, Coinbase criticized the proposed rule for not considering less restrictive regulatory alternatives and violating the Administrative Procedures Act. The company argued that the NPRM’s broad definitions and suspicionless reporting mandates may overwhelm businesses and lead to de-risking practices, contradicting FinCEN’s technology-neutral approach and privacy directives.
Coinbase urged FinCEN to focus on targeted alerts and guidance, leverage existing suspicious activity reporting procedures, and address privacy and security risks associated with extensive customer data reporting. The company called for a clear roadmap for industry feedback before implementing any part of the proposed rule, emphasizing the importance of industry input and compliance steps to be laid out by FinCEN.
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