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Treasury warns crypto industry about money laundering risks in ‘mixers’

The cryptocurrency industry must follow the US Treasury Department’s anti-money laundering and sanctions rules to prevent bad actors from abusing platforms known as “mixers” to launder illicit funds, a senior official said.

Blenders that allow users to cryptocurrencies with relative anonymity can be a way for illegal actors to disguise the possession and movement of funds while making it harder for law enforcement to gain insight into the transfers, Elizabeth Rosenberg, the assistant treasury secretary for terrorist financing and financial crime, said in a speech on Friday.

“The challenge is that while these services often act as money transmitters and are therefore subject to regulatory reporting requirements, they may be intentionally non-compliant to make it more difficult for regulators and law enforcement to track down illicit funds,” she said in the speech given at the Crypto Council for Innovation, a Washington-based trade association championing the crypto industry.

The Treasury Department in August sanctioned Tornado Cash, a currency mixer that allows users to mix their funds to disguise ownership, and accused it of facilitating the laundering of billions of dollars in virtual currency, including $455 million that it allegedly stolen by North Korean hackers.

Crypto industry participants have raised questions about the sanctions imposed on Tornado Cash, a platform built on open-source, self-running software protocols. Some members of the decentralized finance community have expressed concerns about what they see as excessive government pressure on the industry. Some including Coinbase Global inc

and industry advocacy groups, have sued the Treasury Department, claiming the action against Tornado Cash violated American privacy and First Amendment rights.

Ms. Rosenberg said crypto industry participants who submitted comments earlier this year on the Treasury Department’s plans to mitigate the illicit financial risks of digital assets acknowledged that virtual currency companies must comply with anti-money laundering and sanctions requirements. She called on the crypto industry to take action to prevent bad actors from abusing these platforms, adding that the department welcomes opportunities to engage with the industry to learn more about how these technologies are challenging the requirements of the Ministry of Finance to combat money laundering and sanctions can still meet promote the privacy of participants.

“Our goal and intention is not to prevent the development of technologies that provide privacy for the transfer of virtual assets,” she said.

Authors: Mengqi Sun at mengqi.sun@wsj.com

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Source: Crypto News Deutsch

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