Bitcoin Policy Institute Submits Comments to FinCEN on Proposed Regulation of Virtual Currency Mixing

The Bitcoin Policy Research Institute has officially submitted comments on proposed regulation of convertible virtual currency (CVC) mixers to FinCEN on social media. The organization stated that FinCEN aims to regulate "CVC mixers" to prevent money laundering. While the intention is good, the broad definition of CVC mixers will undermine the financial privacy necessary for democratic society. Non-custodial coin-mixing transactions or the use of disposable wallets are legitimate financial practices that fall under FinCEN's proposed "CVC mixer" category. These activities are crucial for private use of Bitcoin, just as VPNs are for internet privacy.

FinCEN's proposal puts layer 2 protocols like the Lightning Network at risk as they may be misclassified as mixers. FinCEN's definition may also affect community financial services, digital asset custody services, and self-custody wallets. These are not designed to hide funds, but are crucial for basic online financial privacy. FinCEN's rules may render such tools unusable, effectively banning private use of Bitcoin in the United States. Full implementation of FinCEN's proposal would conflict with the structure of US law and cultural values.