U.S. Senator Backs Out of Controversial Cryptocurrency Legislation

TLDR

  • Senator Roger Marshall has withdrawn his support for the Digital Asset Anti-Money Laundering Act (DAAMLA).
  • The DAAMLA bill aims to bring the crypto industry under existing anti-money laundering frameworks.
  • The bill has faced criticism from crypto advocates and former government officials.
  • Senator Elizabeth Warren, who co-sponsored the bill, is running for reelection in 2024.
  • The bill classifies various crypto service providers as financial institutions subject to Bank Secrecy Act compliance.

In a surprising turn of events, Republican Senator Roger Marshall has withdrawn his support for the Digital Asset Anti-Money Laundering Act (DAAMLA), a bill he co-sponsored with Democratic Senator Elizabeth Warren in 2022.

This move, recorded on July 24, 2024, marks a significant shift in the political landscape surrounding cryptocurrency regulation in the United States.

The DAAMLA bill, reintroduced to the Senate in July 2023, aims to bring the crypto industry under existing Anti-Money Laundering and Counter-Terrorist Financing frameworks.

It proposes to classify a wide range of crypto service providers, including decentralized wallet providers, validators, and miners, as financial institutions. This classification would subject them to the terms of the Bank Secrecy Act.

Senator Warren, who is running for reelection in 2024 to represent Massachusetts, has been a vocal critic of the crypto industry. When introducing the bill, she claimed that crypto was being used by “rogue nations, oligarchs, drug lords, and human traffickers” to launder money.

However, the bill has faced significant criticism from various quarters. Crypto organizations argue that it exaggerates crypto’s role in funding terrorism and illicit activities.

They warn that the proposed legislation could severely impact the U.S. crypto industry.

In February 2024, the Chamber of Digital Commerce, a U.S.-based crypto advocacy group, urged the Senate Banking Committee not to consider the DAAMLA bill.

They argued that it could “erase hundreds of billions of dollars in value for U.S. startups and decimate the savings of countless Americans” who had legally invested in crypto.

Adding to the concerns, a group of 80 former military and national security officials from the U.S. government wrote a letter warning lawmakers against supporting the bill.

They suggested that the legislation could drive the majority of the digital asset industry overseas, potentially hindering law enforcement and increasing national security concerns.

Despite these criticisms, the bill still has the support of 18 senators from both parties. It mandates the Financial Crimes Enforcement Network to issue regulations for reporting significant foreign digital asset holdings and seeks to establish compliance measures for financial institutions to mitigate risks associated with anonymity-enhancing technologies.

Senator Marshall’s withdrawal as a co-sponsor is particularly noteworthy given his previous stance on crypto. He has been vocal in his criticism of the asset class, labeling it a “threat to national security.”

In April, Marshall and Warren jointly expressed concerns about the role of stablecoin issuer Tether in potentially facilitating attempts to circumvent U.S. sanctions.

The reasons behind Marshall’s change of heart remain unclear, as his office has not yet commented on the decision.

This development adds another layer of complexity to the ongoing debate about crypto regulation in the U.S., highlighting the evolving nature of political stances on this issue.

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