MSTR Cat

Crypto Law/Level VII · Loopholes worth understanding/7.3 Loopholes they sell you/Lesson 6

Privacy coins and mixers: what is actually allowed

What US and EU law says about holding privacy coins and using mixers as of October 2026, where the line falls between users and operators, and why the rules keep moving.

Education, not legal, tax or investment advice. Crypto law differs between countries and states and changes often. Check the current rules where you live with a qualified lawyer or tax adviser before you act.

The lean path

The cheapest, lowest-tax, simplest and most private route the law allows, best first. Each step names the rule it rests on and the condition that keeps it lawful.

  1. Holding privacy coins in your own wallet is lawful under US federal law as of October 2026, and self-custody shares data with no one; gains on them remain taxable and must be reported.
  2. Using a mixer with lawfully earned coins is not itself a crime, but first check OFAC’s free sanctions list search; listed services such as Blender.io and Sinbad are off-limits to US persons.
  3. Keep records showing where mixed or private coins came from; mixing criminal proceeds to conceal them is laundering under 18 U.S.C. §1956, and platforms may freeze mixer-linked deposits without that proof.
  4. Mixing for others as a business is money transmission requiring FinCEN registration under FIN-2019-G001, while supplying anonymizing software is not; from 10 July 2027 EU service providers may not keep accounts for anonymity-enhancing coins.

MaterialsFinCEN guidance FIN-2019-G001 (9 May 2019), section on anonymity-enhanced transactions18 U.S.C. §1956, the money laundering statuteRegulation (EU) 2024/1624, Article 79, on EUR-LexFinCEN’s withdrawal of its mixing proposal (Federal Register, 6 October 2026)

Wonder

  1. Is it illegal to own a privacy coin or use a mixer?
  2. Why do platforms refuse privacy coins if holding them is lawful?
  3. When does using a mixer become money laundering?

Explore

  1. Privacy coins are cryptocurrencies built to hide the sender, recipient or amount on their own ledgers. Mixers pool coins from many users on transparent chains such as Bitcoin or Ethereum to break the visible link between deposit and withdrawal. FinCEN’s 2019 guidance, FIN-2019-G001, calls both ‘anonymity-enhanced’ transactions and describes coins engineered to prevent tracing as privacy coins. Financial privacy is a lawful interest; in its October 2026 notice FinCEN itself acknowledged that lawful users may use mixers for financial privacy on public blockchains. US federal law does not ban individuals from holding privacy coins. The legal risk lies in whose money passes through, and in duties placed on businesses.
  2. The 2019 guidance draws the main line for businesses. A person who provides anonymizing services, mixing other people’s coins as a business, is a money transmitter under FinCEN’s rules, with registration and anti-money-laundering duties, while a person who only supplies anonymizing software is not. Ordinary users moving their own coins are not money transmitters (lesson 5.2.1). Operators who crossed that line have been prosecuted. Roman Sterlingov, who prosecutors said operated the Bitcoin Fog mixer from 2011 to 2021, was convicted in March 2024 of money laundering conspiracy, money laundering and unlicensed money transmission, and on 8 November 2024 was sentenced to 12 years and six months in prison.
  3. For users the main danger is the money laundering statute. Under 18 U.S.C. §1956, conducting a financial transaction with the proceeds of specified unlawful activity, knowing the property comes from crime, and intending to conceal or disguise its nature, location, source, ownership or control, is a federal crime. Putting stolen or scam proceeds through a mixer is concealment of exactly that kind. Mixing coins that were lawfully earned is not laundering in itself; the source of the funds and the purpose decide. Sanctions are a separate line: OFAC has listed operator-run mixers such as Blender.io and Sinbad, and US persons may not deal with listed services (lesson 5.2.6).
  4. Rules for builders and services have been contested and are still moving. Tornado Cash’s sanctions were lifted in 2025 after the Fifth Circuit held its immutable contracts were not blockable property (lesson 5.2.6), yet co-founder Roman Storm was convicted on 6 August 2025 of conspiring to operate an unlicensed money transmitting business, and Samourai Wallet’s founders pleaded guilty in 2025 (lesson 5.2.7). On 7 April 2025 Deputy Attorney General Todd Blanche told prosecutors to stop targeting mixing and tumbling services for their end users’ acts or unwitting regulatory violations, subject to stated priorities. On 6 October 2026 FinCEN withdrew its 2023 proposal to treat international mixing as a primary money laundering concern.
  5. Businesses face tighter rules than users, especially in Europe. Article 79 of the EU’s Anti-Money Laundering Regulation, Regulation (EU) 2024/1624, prohibits credit institutions, financial institutions and crypto-asset service providers from keeping anonymous crypto-asset accounts or accounts allowing anonymisation or increased obfuscation of transactions, ‘including through anonymity-enhancing coins’. The regulation defines those coins as crypto-assets with built-in features designed to make transfer information anonymous, systematically or optionally, and it applies from 10 July 2027. The rule binds service providers rather than people holding coins in their own wallets, but it means regulated EU platforms will not be able to offer accounts that handle such coins.
  6. So what is allowed? In the US as of October 2026, holding a privacy coin, and using a mixer that is not sanctioned with lawfully earned coins, are not crimes in themselves. Businesses that mix for others must register and run compliance programmes, listed services are off-limits, and criminal proceeds turn any concealment into laundering. Expect friction anyway: platforms may question or freeze deposits traced to mixers (lesson 4.3.1). A practical check before mixing: confirm the service is not on OFAC’s sanctions list, keep records showing where the coins came from, and check your own country’s rules, which may be stricter than those described here.

Key facts

  • FinCEN guidance FIN-2019-G001 states that an anonymizing services provider is a money transmitter and an anonymizing software provider is not.
  • Under 18 U.S.C. §1956, a financial transaction with criminal proceeds designed to conceal their nature, location, source, ownership or control can be money laundering.
  • Bitcoin Fog operator Roman Sterlingov was sentenced on 8 November 2024 to 12 years and six months in prison.
  • On 7 April 2025 the Deputy Attorney General directed that the Justice Department no longer target mixing and tumbling services for the acts of their end users or unwitting regulatory violations.
  • On 6 October 2026 FinCEN withdrew its October 2023 proposal to designate international convertible virtual currency mixing as a class of transactions of primary money laundering concern.
  • Article 79 of Regulation (EU) 2024/1624 bars crypto-asset service providers from keeping accounts that allow anonymisation, including through anonymity-enhancing coins, from 10 July 2027.

Exercise nine, six, three, one

9CollectList up to 9 privacy tools or practices you use or have heard of, such as privacy coins, mixers, CoinJoin wallets, new addresses or private relays (some lists are shorter).
6ClusterSort them into 6 categories: privacy coins, mixing services run by an operator, self-run or software-only tools, ordinary wallet hygiene, tools linked to sanctioned services, and tools you cannot classify yet.
3DistillReduce the 6 to 3 groups: uses that are lawful in your jurisdiction with clean funds, uses that create duties or risks for a business, and uses you should check against sanctions and laundering rules.
1CrystallizeWrite 1 sentence explaining what decides whether a mixer transaction is lawful privacy or money laundering.

Fact check

Dates, figures and claims checked against the published sources listed below.

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