Sen. Bernie Sanders says the law must be enforced to curb money laundering and criminal use of digital currencies.
It is the biggest legislative threat to crypto ever made public.
That is the conclusions drawn by the coin center, the cryptocurrency industry think tank, after analyzing a bill introduced by Sen. Elizabeth Warren and Sen. Roger Marshall on Wednesday.
In an effort to bring crypto into the regulatory regime governing TradFi, the bill would expand know-your-customer requirements to crypto wallet providers, miners, validators and other network participants that may act to validate, secure, or facilitate digital asset transactions. A money service business would be designated as such ventures.
Under the Digital Asset Anti-Money Laundering Act, financial institutions would be unable to use a Tornado Cash-style mixer or other 'anonymity enhancing technologies' and from utilizing crypto that had gone through such protocols. The bill would enhance U.S. national security by closing crypto money laundering loopholes and supporting enforcement to improve safeguarding American civil liberties.
In targeting anonymity, the Senate's men are treading on one of the most cherished values in crypto-financial privacy. But they argue that the step is necessary to curb criminal use of cryptocurrencies.
Warren and Marshall were both able to pick their moment well. The bill was introduced a day after the U.S. prosecutors charged Sam Bankman-Fried with eight counts of fraud, conspiracy, and violations of campaign finance laws in connection with his management of FTX.
Bankman-Fried has been charged with defrauding investors since 2019 by using customer assets to cover losses and margin calls at Alameda Research, the cryptocurrency hedge fund, which the 30-year-old entrepreneur controlled.
Bankman-Fried and crypto lobbyists stressed this was not the aim of the bill and that such language would be modified by the time the bill reaches a final draft. Odds of that bill's passage this year have evaporated after the collapse of FTX and scrutiny of everything related to Bankman-Fried, Fortune has reported, though the bill is expected to be reintroduced next year.
Coin Center referred to the DCCPA in its takedown of the Warren-Marshall bill Wednesday.
We've been outspoken critics of legislation that unknowingly or unwittingly sweeps non-custodial infrastructure providers and software developers into the ambit of financial services surveillance and regulation, it said in a statement.
Warren, a former professor of bankruptcy law at Harvard University, is a prominent critic of crypto among lawmakers, frequently pointing to its use in fraud, cyber crime and sanctions evasion.
The same report notes, however, that growth in crypto crime is outpaced last year by growth in crypto usage overall. 'Illicit activity's share of cryptocurrency transaction volume has never been lower,' according to Chainalysis, accounting for less than a fifth of a percent of all crypto transactions in 2021.
Warren, who is the only senator with an 'F' rating from the Crypto Action Network, a nonprofit funded by Coinbase, is the only candidate to receive an 'F' rating. Roger Marshall, among other lawmakers who did not receive a grade 'due to lack of action' regarding digital currencies, was among the many lawmakers who did not receive a grade.
Marshall said he was ready to move from America's financial system.