Treasury Department Takes Aim At Convertible Virtual Currency Mixing

The Treasury Department has recently issued a notice of proposed rulemaking under the Bank Secrecy Act regarding the reporting of convertible virtual currency ("CVC") mixing.¹

Perceived Problems with CVC Mixing

The Treasury Department explains that "[t]he public nature of most CVC blockchains, which provide a permanent, recorded history of all previous transactions, make[s] it possible to know someone's entire financial history on the blockchain."² CVC mixing involves various methods "intended to obfuscate transactional information, allowing users to obscure their connection to the CVC."³ These methods include:

• "combining CVC from two or more persons into a single wallet or smart contract and, by pooling or aggregating that CFC, obfuscating the identity of both parties to the transaction by decreasing the probability of determining both intended";⁴