Amid the U.S. Senate hearings on the FTX crash this week, Sens. Elizabeth Warren (D-Mass) and Roger Marshall (R-Kan) introduced the Combating Digital Assets from Money Laundering Act, targeting the crypto sector with a series of proposed regulations dubbed by critics as tyrannical and unconstitutional. The bill effectively kills the golden goose.
The new legislation has been put forth to target money laundering, seeking to make the digital asset ecosystem compliant with existing money laundering systems. The Digital Assets Anti-Money Laundering Act would also prohibit financial institutions from using a Tornado Cash-style mixer or other technology to enhance anonymity, as well as use cryptos that passed through such protocols.
The restrictions on privacy services and tools—defined in the Digital Asset Anti-Money Laundering Act as services designed to hide or confuse the origin, destination, and counter-parties of a digital assets transactions—would directly contradict the provisions of the FCRA, since credit reporting agencies would be allowed to keep an unlimited record of each users financial information and transactions with no ability to delete.
The Act would have significant implications for the privacy of Bitcoin and cryptocurrency users, and is designed to reduce the risks posed by cryptocurrency and other digital assets to U.S. national security by closing loopholes in the current anti-money laundering framework.
The bill seeks to close financial system loopholes that present a national security risk by allowing digital assets to be used to launder money, Warren’s office told CNN.
The bill would direct the Financial Crimes Enforcement Network (FinCEN) to consider cryptocurrency wallet service providers, miners, validators, and other users of the network to be money services businesses, according to a statement from Warren. They then would require KYC of participants alongside requirements for anti-money laundering (AML) programs.
The seven-page bill would broaden the definition of money services business (MSB), ban financial institutions from using technologies like digital asset mixers, and regulate digital asset kiosks, aka automated teller machines, or ATMs.
The bill would also prevent financial institutions from using privacy tools like cryptocurrency mixers, and mandate that cryptocurrency companies must comply with the same money laundering rules that banks must, in addition to regulating cryptocurrency kiosks (ATMs).
“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,” said Warren in a statement reported by Decrypt. “The bipartisan bill will help close crypto money laundering loopholes and strengthen enforcement to better safeguard U.S. national security.”
The bipartisan bill would help to eliminate cryptocurrency money-laundering loopholes and enhance enforcement, while also enhancing protections for US national security. The proposed legislation is proposed to remove requirements that cryptocurrency businesses and projects register as virtual asset service providers, as a response to FTXs failure.
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