Coinbase urges US Treasury to reconsider bulk data reporting in proposed crypto mixing rules

Coinbase said the U.S. Treasury’s proposed rulemaking on cryptocurrency mixing fails to adequately address a regulatory gap while demanding unnecessary amounts of data and resources from crypto platforms.

In a comment filed Monday to the Treasury Department's Financial Crimes Enforcement Network (FinCEN), Coinbase suggested that regulated crypto platforms are already obligated to recordkeeping and reporting rules on suspicious activities and illicit crypto mixing. 

Coinbase said that the proposed requirement for crypto platforms to report all crypto mixing activities, including those with legitimate purposes, is not an efficient use of companies’ resources. The filing also took issue with there being no monetary threshold for recordkeeping and reporting. 

Paul Grewal, chief legal officer of Coinbase, wrote in an X post that the absence of a monetary threshold will “just lead to bulk reporting of non-suspicious transactions.”

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

Coinbase’s comment came in response to FinCEN’s proposed rulemaking in October that aims to improve transparency surrounding crypto mixing activities. 

“This is FinCEN’s first ever use of the Section 311 authority to target a class of transactions of primary money laundering concern, and, just as with our efforts in the traditional financial system, Treasury will work to identify and root out the illicit use and abuse of the CVC ecosystem,” said FinCEN Director Andrea Gacki in an October statement. 

Potential approaches

Many illicit actors, such as North Korean hackers and Russia-based ransomware attackers, have used crypto mixers for money laundering activities. While FinCEN said in its proposal that such mixers could promote money laundering, it acknowledged that crypto mixing can be used for “legitimate and innovative purposes.”

“If Treasury wants to focus on this issue, they should help Exchanges meet their existing obligations to report suspicious activity involving mixing,” Grewal said on X. “This is what Treasury has done elsewhere, and specific guidance is more effective than mandatory bulk reporting rules.”

In light of these issues, Coinbase suggested that FinCEN should add a threshold to eliminate bulk reporting of small transactions. Coinbase also recommended requiring recordkeeping at most, rather than reporting, to bypass privacy and security risks.