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Bitcoin service platform Swan Bitcoin warned its customers that it would be forced to terminate accounts found interacting with crypto-mixing due to the regulatory obligations of its partner banks.
Customers were informed about the policy in a letter suggesting the changes are made due to the new Financial Crimes Enforcement Network (FinCEN) proposed rule that establishes new responsibilities on firms processing transactions from mixing services.
On Nov. 12, the co-founder of the firm, Yan Pritzker, took to X (formerly Twitter) to explain that although the firm is not against the use of privacy mixing tools and services, it has to adhere to the obligations of its partner banking institutions.
Pritzker said that the proposed FinCEN rule is poorly written and covers a huge amount of Bitcoin-related activities, such as using BTC addresses only once, mixing funds and prohibit the use of any programmable transactions of any sort (Lightning channels).
He added that mixing services are painted with a scary brush instead of what they are: a common way to break large bits of Bitcoin into small ones with privacy in focus.
Financial regulators in the U.S. have portrayed crypto-mixing services as a route for illicit activities and also put a curb on crypto-mixing services. They have sanctioned such activities and have also prosecuted and jailed the creators of Tornado Cash for carrying them out.
“In fact, we have written and published privacy guides that encourage mixing and promoted companies like Wasabi and Samourai. We believe that mixing is normal, privacy is not a crime, and that using unmixed Bitcoin is similar to bringing your whole paycheck to the grocery store to pay for an apple, “ Pritzker explained.
Pritzker noted that the current political climate has put a lot of fear into the banking sector, with most banks simply refusing to do business with anything in “crypto.” Thus, for them to continue their Bitcoin on-ramp services, their custody partner has to interact with banking services governed by FinCEN regulations.
In its letter to customers, Swan Bitcoin also suggested ways such policies can be opposed and said educating the masses on Bitcoin is the first step towards that.
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