With Bitcoin operator convicted, are crypto mixers now illegal?

On March 12, a federal jury in Washington, D.C., convicted dual Russian-Swedish citizen Roman Sterlingov of manipulating Bitcoin.
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Fog is a mixer that was active from 2011 to 2021. “Roman Sterlingoff ran Bitcoin Fog, a cryptocurrency 'mixing' service that allowed criminals to launder hundreds of millions of dollars in illicit funds from darknet markets. “Defendants and their customers believed they could use Bitcoin Fog to conceal these illegal transactions,” said Acting Assistant Attorney General Nicole M. Argentieri of the Justice Department's Criminal Division.

In a press release from the Department of Justice, Deputy Attorney General Lisa Monaco declared: “Our team of investigators, analysts, and prosecutors were relentless in the pursuit of justice, painstakingly tracking Bitcoin through the blockchain to thwart Sterlingoff and his Bitcoin Fog operation,” the account said. ” Mr. Sterlingoff could face up to 50 years in prison for money laundering and operating a financial services business without a license.

The policy question this raises in the United States is that all crypto mixers are essentially illegal, and that running a “company” like the one Monaco describes as Bitcoin Fog would make that person similarly insecure. This raises the idea of ​​putting one at risk of being accused of laundering. I had the opportunity to speak with the Director of Communications at Coin Center, a leading think tank in Washington DC, about the policy issues facing cryptocurrencies.

“The main thing to note is that it's not all that surprising that central mixers would be shut down or licensed. It's in line with current law, as we allege in our lawsuit. , the targeting of decentralized tools like Tornado Cash goes beyond existing sanctioning powers,” said Neeraj Agrawal, communications director at Coin Center.

The lawsuit Agrawal is referring to is a 2022 lawsuit filed by Coin Center and other privacy advocates against the U.S. Treasury Department's Office of Foreign Assets Control. The opinion in the case ruled against Coin Center, but the group is seeking an appeal in U.S. District Court. Tornado Cash operates based on smart contract programming on Ethereum.
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blockchain. This basically means that there are automated programs that users can access to maintain their privacy and/or access this “mixing” service. However, Tornado Cash does not have a central operator and is not necessarily a “company” like Bitcoin Fog. The question arising from this case is whether regulators consider Tornado Cash, a decentralized cryptocurrency mixer, to be different from centralized mixers that engage in illicit financial activities such as money laundering and terrorist financing.

In October 2023, the Financial Crimes Enforcement Enforcement (FinCEN) proposed treating all “international convertible virtual currency blends” (CVC blends) as a type of transaction of primary money laundering concern. The action stemmed from Hamas terrorist attacks against Israel and invoked the USA PATRIOT Act, which treats CVC mixing as a money laundering concern. This means that financial institutions will need to provide information reporting when these mixers are used.

These actions may have had a substantial chilling effect on the operations of Bitcoin Mixer, a Bitcoin Lightning wallet run by U.S. Wallet of Satoshi, which announced that its app would be removed from Apple in the U.S. in November 2023. It seems like there is.
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and the Google Platform and will no longer serve customers in the United States. Although no specific reason has been given, operating a cryptocurrency mixer of any kind seems to be a risky business these days.