Swan Bitcoin, a prominent Bitcoin services platform, has issued a warning to its customers, stating that it will terminate accounts discovered engaging with crypto-mixing services. This move comes in response to regulatory obligations imposed by the partner banks of Swan Bitcoin, underscoring the challenges faced by crypto companies in navigating evolving regulatory landscapes.
In a letter to customers, Swan Bitcoin informed them about the policy shift, attributing the changes to the proposed rule by the United States Financial Crimes Enforcement Network (FinCEN). The rule aims to establish new responsibilities for firms processing transactions from mixing services, a move that has sparked concerns and discussions within the crypto community.
Yan Pritzker, the co-founder of Swan Bitcoin, took to social media to elaborate on the decision. Pritzker clarified that while Swan Bitcoin supports privacy measures, including the use of mixing tools and services, it is compelled to adhere to the obligations set by its partner banking institutions. He criticized the proposed FinCEN rule, describing it as poorly written and encompassing a broad spectrum of Bitcoin-related activities, such as using BTC addresses only once, mixing funds, and prohibiting programmable transactions like those on the Lightning Network channels.
Pritzker emphasized that mixing services should not be demonized, as they serve as a common method to enhance privacy by breaking down large amounts of Bitcoin into smaller, more discreet transactions. He highlighted Swan Bitcoin’s commitment to privacy by mentioning their previously published guides encouraging mixing and endorsing companies like Wasabi and Samourai.
In the face of regulatory scrutiny on crypto-mixing services in the U.S., financial regulators have often portrayed them as conduits for illicit activities. Notably, Swan Bitcoin has previously advocated for privacy in its guides, and Pritzker underscored the belief that privacy is not a crime.
Acknowledging the fear prevailing in the banking sector due to the current political climate, Pritzker noted that many banks are hesitant to engage with anything related to crypto. To maintain their Bitcoin on-ramp services, Swan Bitcoin’s custody partner must align with banking services governed by FinCEN regulations.
The letter to customers also suggested avenues for opposing such policies, emphasizing that education about Bitcoin is crucial in advocating for change. Swan Bitcoin’s stance reflects the ongoing challenges faced by crypto companies in balancing user privacy with regulatory compliance in an environment of evolving rules and heightened scrutiny.