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By John Zasada, JD, CAMS – Shareholder, Financial Institutions Group

On Oct. 19, 2023, the Consumer Financial Protection Bureau (CFPB) and the Financial Crimes Enforcement Network (FinCEN) each issued separate Notices of Proposed Rulemakings. The FinCEN’s 80-page proposal would require financial institutions to implement recordkeeping and reporting requirements relating to transactions involving convertible virtual currency (CVC) mixing.

What is CVC Mixing?

According to the FinCEN, CVC mixing means the facilitation of CVC transactions in a manner that obfuscates the source, destination or amount involved in one or more transactions, regardless of the type of protocol or service used, such as one of the following:

  • Pooling or aggregating CVC from multiple persons, wallets, addresses or accounts
  • Using programmatic or algorithmic code to coordinate, manage or manipulate the structure of a transaction
  • Splitting CVC for transmittal and transmitting the CVC through a series of independent transactions
  • Creating and using single-use wallets, addresses or accounts, and sending CVC through such wallets, addresses or accounts through a series of independent transactions
  • Exchanging between types of CVC or other digital assets
  • Facilitating user-initiated delays in transactional activity

What is the Proposed Regulation?

The proposed regulation would require a covered financial institution to collect, maintain records of and report to FinCEN within 30 calendar days of initial detection of a covered transaction, in the manner that FinCEN may prescribe, certain information regarding covered transactions that involve CVC mixing.

The CFPB’s 299-page proposal would implement section 1033 of the Consumer Financial Protection Act of 2010 and make it easier for consumers to switch financial institutions and provide consumers with the legal right to grant third parties access to information associated with their credit card, checking, prepaid and digital wallet accounts.

According to the CFPB, the rule would do the following:

  • Require financial institutions to make available to consumers and authorized third parties certain data relating to consumers’ transactions and accounts
  • Establish obligations for third parties accessing a consumer’s data, including important privacy protections for that data
  • Provide basic standards for data access
  • Promote fair, open and inclusive industry standards

Doeren Mayhew’s regulatory compliance specialists will continue to monitor these proposed rules for CVC mixing. To learn more about how this may impact your financial institution, contact us today.