Elizabeth Warren Unveils Bipartisan Bill to Combat Crypto Money Laundering

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New York CNN—

As federal prosecutors seek to jail former crypto darling Sam Bankman-Fried, Senator Elizabeth Warren is trying to push through Congress a bipartisan crackdown on money laundering in the crypto industry.

The Massachusetts Democrat joins Republican Senator Roger Marshall of Kansas to introduce new legislation on Wednesday that would seek to close loopholes in the financial system that pose national security risks by allowing digital assets to be used for money laundering. money, Warrens’ office told CNN. .

Due to time constraints, the Warren-Marshall crypto legislation is unlikely to make it through this Congress. The bill is expected to be reintroduced when the new Congress sits.

The effort aims to level the playing field by forcing crypto businesses to abide by the same rules that apply to banks and traditional businesses.

I’ve sounded the alarm in the Senate about the dangers of these flaws in digital assets, and I’m working bipartisanly to pass common-sense crypto legislation to better protect U.S. national security, Warren told CNN in an exclusive statement.

Alluding to the FTX scandal, Warren said the bankruptcy of a major crypto platform and the criminal prosecution of its former CEO means digital assets are under intense scrutiny across the political spectrum.

Warren and Marshall’s push comes just a day after Bankman-Fried, the former CEO of crypto exchange FTX, was charged with money laundering and several other federal offenses. Prosecutors allege Bankman-Fried engaged in a global scheme to deceive and defraud customers, investors, lenders and the campaign finance system.

The new bill, called the Digital Asset Anti-Money Laundering Act, would tackle money laundering by attempting to bring the digital asset ecosystem into line with the existing anti-money laundering system in the system. global financial.

The legislation would direct the Financial Crimes Enforcement Network (FinCEN) within the Treasury Department to designate providers of digital asset wallets, miners, validators and others as money services businesses. This in turn would extend the responsibilities of bank secrecy law to the crypto industry, including Know-Your-Customer (KYC) requirements.

The Treasury Department warned earlier this year that hackers, drug dealers and fraudsters are using digital assets to launder illicit proceeds. US officials have also alleged that North Korea, Iran, Russia and other countries have turned to crypto to launder money and even circumvent sanctions.

Following the terrorist attacks of September 11, 2001, our government enacted significant reforms that helped banks weed out bad actors from the US financial system, Marshall said in a statement. Applying these similar policies to cryptocurrency exchanges will prevent the misuse of digital assets to fund illegal activities without limiting access for law-abiding US citizens.

The legislation comes as Warren and other lawmakers are scheduled to hold a hearing Wednesday into the crypto crash and consumer harm.

The bill would also force regulators to move forward with new restrictions aimed at closing a gap for digital wallets that allow people to circumvent anti-money laundering controls and penalties.

Specifically, it would require FinCEN to finalize and implement a proposed rule in 2020 that would require banks and money services businesses to verify customer and counterparty identities, maintain records, and file related reports. to non-hosted wallets or non-Bank compliant jurisdictions. Secrecy Act.

Other requirements of the legislation include:

– Prohibit banks and other financial institutions from using or transacting with anonymity-enhancing technologies such as digital asset mixers and from managing or transacting with digital assets that have used such technologies .

– Expand bank secrecy rules on foreign bank account reporting to include digital assets by requiring Americans engaged in digital asset transactions over $10,000 through offshore accounts to file a report with Internal Revenue Service.

– Directing regulators to strengthen enforcement of Bank Secrecy Act compliance by establishing a compliance review and review process for money services businesses.

– Crack down on digital asset vending machines by ensuring that operators and administrators submit and update the physical addresses of their kiosks.

The staggering revelations of the Bankman-Fried charges underscore how crypto remains the Wild West of the financial world. But it’s unclear whether the FTX scandal will be enough to prompt Congress to take major action.

Isaac Boltansky, director of policy research at BTIG, told CNN that despite all the fingers pointing at FTX, it is extremely difficult to see Congress passing comprehensive crypto reform anytime soon.

Everyone on Capitol Hill can agree that Bankman-Fried is a crook, Boltansky said, but as we move from the upper level to the ground level, it becomes clear that legislative hurdles and potholes remain.

Boltansky said those hurdles include jurisdictional battles and the reality that Congress tends to have a relatively short attention span.

Still, a more targeted legislative package targeting stablecoins or money laundering has the potential to pass Congress next year, he said.

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