In light of the recent collapse of the crypto exchange FTX, Senators Elizabeth Warren and Roger Marshall have introduced the Digital Asset Anti-Money Laundering Act. The Act is aimed at the cryptocurrency industry and its proposed regulations have already elicited opinions from critics calling it “opportunistic” and “unconstitutional.”
The bill proposed by Senator Warren, a vocal critic of cryptocurrencies, and Senator Marshall, will place new know-your-customer (KYC) requirements on crypto network participants. Amid the United States Senate hearings regarding the collapse of the crypto exchange FTX, Senators Warren and Marshall introduced the Digital Asset Anti-Money Laundering Act targeting the cryptocurrency industry. The main aim of the bill is to place KYC requirements on blockchain infrastructure providers and participants in the U.S. The scope of the bill includes developers creating software for decentralised networks and even extends to the validators and miners that support such networks.
Further KYC Requirements Would be Implemented
The bill proposes that the Financial Crimes Enforcement Network (FinCEN) treat cryptocurrency wallet service providers, validators, miners, and other network users as “money service businesses (MSBs),” thereby requiring KYC for participants as well as a requirement for anti-money laundering (AML) initiatives. As it stands, unhosted wallets, miners, and validators are not regarded as MSBs. In line with KYC requirements, it would require these entities to identify their customers and users and track their transactions. A similar rule was proposed by FinCEN in 2020 but was never implemented.
Privacy Coins and “Mixers” Also Targeted
The proposed bill also focuses on privacy coins and “mixers” which are used to conceal and obfuscate the origin and destination of digital asset transactions. Under the bill, “financial institutions” would be barred from “handling, using, or transacting business” with entities such as mixers and with digital assets that have interacted with such technologies. Mixers have recently been a great topic of discussion in the crypto space with the Ethereum mixer service, Tornado Cash, being banned by the U.S. Treasury via sanctions in August.
Senator Warren said in a statement:
The crypto industry should follow common-sense rules like banks, brokers, and Western Union, and this legislation would ensure the same standards apply across similar financial transactions. Adding, “The bipartisan bill will help close crypto money laundering loopholes and strengthen enforcement to better safeguard U.S. national security.”
Digital Asset Anti-Money Laundering Act Already Receives Scrutiny
Warren and Marshall’s proposed bill has already received significant scrutiny from the cryptocurrency industry. Crypto advocacy group Coin Center has condemned the bill as “an opportunistic, unconstitutional assault on cryptocurrency self-custody, developers, and node operators.”
Director of Research of Coin Center, Peter Van Valkenburgh posted made his opinion known on Twitter, saying:
Senators Warren and Marshall’s proposed bill subjecting software devs & nodes to AML is “a repudiation of liberal values and a move towards the types of surveillance and control prized by authoritarians like Vladimir Putin, Xi Jinping, and Kim Jong-un”https://t.co/s7pRKsWV2W
— Peter Van Valkenburgh 🫡🦬🚲🌐🥐 | 🚫💳🕵️🌽🛢️🚗 (@valkenburgh) December 14, 2022
He further opined:
The Digital Asset Anti-Money Laundering Act is a direct attack on technological progress and also a direct attack on our personal privacy and autonomy.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
