Bitcoin (BTC) service platform Swan Bitcoin has warned its customers that it will be forced to terminate accounts found to have interacted with cryptocurrency mixing due to the regulatory obligations of its partner banks.
Customers were informed of the policy in a letter indicating that the changes were due to proposed rules by the U.S. Financial Crimes Enforcement Network (FinCEN) that would impose new responsibilities on firms that process transactions through hybrid services.
On November 12, company co-founder Yan Pritzker posted on X (formerly Twitter) explain While the company is not opposed to the use of privacy hybrid tools and services, it must comply with the obligations of its partner banking institutions.
Pritzker said the proposed FinCEN rules were poorly written and covered a large number of Bitcoin-related activities, such as using a BTC address only once, commingling 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 rather than what they are: a common method of breaking large amounts of Bitcoin into smaller chunks with a focus on privacy.
Financial regulators in the United States have described cryptocurrency mixing services as avenues for illegal activity and have sought to curb them. Regulators have approved such activity and have prosecuted and imprisoned the creators of Tornado Cash. Pritzker added:
“In fact, we have written and published privacy guidelines that encourage mixing and promote companies like Wasabi and Samourai. We believe mixing is normal, privacy is not a crime, and using unmixed Bitcoin is akin to taking your entire paycheck with you. Go to the grocery store and buy apples.”
Pritzker said the current political climate has created a lot of fear in the banking industry, with most banks simply refusing to do business with any cryptocurrency. Therefore, in order for them to continue to provide Bitcoin on-ramp services, their custody partners must interact with banking services that are governed by FinCEN regulations.
In a letter to customers, Swan Bitcoin also proposed ways to oppose such policies, saying that educating the masses about Bitcoin is the first step towards achieving this goal.
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