US lawmakers introduce bill to suspend crypto mixer transactions

US lawmakers have proposed a new bill that aims to temporarily prevent financial institutions from engaging in transactions involving funds that have been through crypto mixers.

Congressman Sean Casten (IL-06) introduced the bill on May 7 and received support from Representatives Bill Foster, Brad Sherman, and Emmanuel Cleaver.

Blockchain Integrity Act

The proposed legislation, dubbed the Blockchain Integrity Act, seeks to impose a two-year moratorium on financial institutions, such as crypto exchanges, virtual asset service providers (VASPs), and other registered money service businesses (MSBs), from accepting incoming funds routed through a mixer. It also aims to bar outgoing funds from being withdrawn directly to a known mixer address.

During this period, the bill mandates the Treasury Department, SEC, CFTC, and DOJ to conduct a comprehensive study on digital asset mixers, privacy coins, and anonymity-enhancing technologies. This study includes analyzing statistics on their illicit uses, insights into legitimate applications, and crafting tailored legislative suggestions to counter illegal activities by specific perpetrators.

A crypto mixer is a service used to “mix” diverse crypto funds with others to obscure their origin. Typically, this involves pooling source funds from various inputs over an extended random period before redistributing them to destination addresses.

Congressman Casten expressed the opinion that digital asset mixers should be treated as potential tools for money laundering unless subjected to rigorous audits. He claimed that digital assets have been used to finance terrorist activities globally in recent years, adding that:

“A temporary ban while we study this technology will help us better understand how it is used for illicit purposes, prevent future crypto-funded terrorism, and inform future policymaking.”

Similarly, Congressman Foster emphasized that mixers enable malicious actors to perpetrate financial crimes undermining US security. Meanwhile, Congressman Sherman noted mixers aid in achieving crypto’s objective of facilitating concealed transactions.

Notably, this bill emerges amidst heightened scrutiny by US authorities on mixers, alleging that these privacy-enhancing services facilitate illicit financial activities.