Polygon Labs and DELV, formerly Element Finance, have jointly addressed FinCEN's proposed regulation on CVC Mixing. Polygon Labs published an official document outlining their collective concerns about the broad and impractical nature of FinCEN's proposal.

The main contention revolves around the definition of CVC mixing, which encompasses various activities such as aggregating CVC from multiple sources and utilizing privacy-enhancing technologies. This broad scope could stifle innovation within the blockchain community and hinder the development of legitimate applications.

Additionally, compliance with the proposed regulation would incur substantial costs for financial institutions, particularly smaller ones, due to the need to collect and transmit detailed transaction information.

Moreover, the lack of clear guidance on identifying and tracking CVC mixing transactions could result in inconsistent implementation and confusion. Furthermore, the parties argue that such regulations could negatively impact economic prosperity and national security by placing US businesses at a disadvantage compared to international competitors.

As an alternative, Polygon Labs and DELV propose a targeted approach that focuses on identifying and prosecuting illicit actors misusing CVC mixing, fostering collaboration between blockchain users and law enforcement to develop effective detection and tracking tools.

While FinCEN has yet to respond to the joint statement, Polygon Labs and DELV anticipate that their rationale will prompt reconsideration of the proposed rule.