Treasury Backs Down on Biden-Era Cryptocurrency Surveillance Proposal

The U.S. Treasury's Financial Crimes Enforcement Network (FinCEN) has withdrawn its proposal for a rule that would require financial institutions to report on cryptocurrency transactions that they "know, suspect, or have reason to suspect" involve mixing in a foreign jurisdiction. The proposal was first made in October 2023, and the government withdrew it this week, citing complaints from the crypto industry and privacy concerns.

"While FinCEN maintains that illicit actors continue to use mixers and other tools and methods to hinder law enforcement investigations, this withdrawal is informed by the concerns from commenters that the expansive definition of [Convertible Virtual Currency] mixing in the proposed rule could have a chilling effect on legitimate activity and place a large reporting burden on covered financial institutions," the withdrawal announcement states.

The USA PATRIOT Act of 2001 gives the Treasury the authority to force banks and other institutions to report on their own customers for national security reasons. Originally created for counterterrorism, this surveillance has steadily expanded into the American and international financial system. The Trump administration has tried to use FinCEN to find illegal immigration and has set up secretive "predictive intelligence" units at the Department of Homeland Security that look at Americans' financial activity, among other data. But in the case of cryptocurrency, the administration has a pro-privacy policy.