Bitcoin (BTC) services platform Swan Bitcoin warned its customers that it would be forced to terminate accounts found to be interacting with crypto mixing due to the regulatory obligations of its partner banks.
Customers were informed of the policy in a letter that said the changes were due to the United States Financial Crimes Enforcement Network (FinCEN) proposed rule that establishes new responsibilities for companies processing mixed services transactions.
On November 12, the company’s co-founder Yan Pritzker reached out to X (formerly Twitter) to explain that while the company is not against the use of privacy mixing tools and services, it remains committed to its commitments must partner banking institutions.
Pritzker said the proposed FinCEN rule is poorly worded and covers a wide range of Bitcoin-related activities, such as one-time use of BTC addresses, commingling of funds and prohibiting the use of any programmable transactions, such as on Lightning Network channels.
He added that mixing services are painted with a scary brush and not what they are: a common method of dividing large amounts of Bitcoin into small amounts with privacy at the forefront.
Financial regulators in the US have portrayed crypto-mixing services as a conduit for illegal activity and sought to curb these services. Regulators have sanctioned such activities and also prosecuted and jailed the inventors of Tornado Cash. Pritzker added:
“In fact, we have written and published privacy guides that encourage mixing and promote companies like Wasabi and Samourai. We believe that mingling is normal, privacy is not a crime, and that using unmixed Bitcoin is like taking your entire paycheck to the grocery store to pay for an apple.”
Pritzker explained that the current political climate has caused great fear in the banking sector and most banks have simply refused to do business with cryptocurrencies. In order for them to continue offering their Bitcoin on-ramp services, their custody partner must interact with banking services that are subject to FinCEN regulations.
In his letter to clients, Swan Bitcoin also suggested ways to resist such policies, saying educating the masses about Bitcoin is the first step in this direction.
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