FinCEN Proposes Reporting Requirements on CVC "Mixing" Transactions

FinCEN proposed new recordkeeping and reporting requirements for financial institutions that facilitate convertible virtual currency ("CVC") "mixing" transactions.

In its Notice, published in the Federal Register, FinCEN said that the proposed rule was designed to mitigate risks posed by CVC "mixing," a process that hides the source, destination and amount involved in transactions. FinCEN explained that CVC mixing is used as a tool by illicit actors for money laundering and other financial crimes because of its ability to conceal the source and destination of funds.

FinCEN stated that the proposed rule would apply to covered financial institutions that provide money transmission services. Covered financial institutions would be required to report information once it becomes aware of, or has reason to suspect, a CVC transaction involving the use of CVC mixing within or involving jurisdictions outside the United States. FinCEN said that CVC mixing would continue to be allowed for legitimate business purposes, provided that financial institutions preserve records of the source and destination of CVC transactions.

Comments on the proposal are due by January 22, 2024.