Bipartisan Bill Targets Crypto Money Laundering Following FTX Collapse

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US Senators Elizabeth Warren and Roger Marshall introduced a bipartisan bill to crack down on illegal uses of cryptocurrency. If passed, the Digital Asset Anti-Money Laundering Act would expand certain aspects of the Bank Secrecy Act (BSA), a Nixon-era law passed by Congress to combat money laundering, to cover entities cryptographic such as wallet providers and miners. Specifically, the new legislation would apply so-called know-your-customer rules to these entities by directing the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) to treat them as money-services businesses. Another BSA expansion would require US citizens to file a report with the Internal Revenue Service whenever they engage in transactions involving more than $10,000 in digital assets.

Additionally, the legislation would direct FinCEN to implement a rule proposed by the agency in late 2020 that would require financial institutions to report transactions involving unhosted digital wallets. According to CoinDesk, these are wallets where the user has full control over the content rather than an exchange or other third party. The legislation would also prohibit financial institutions from using or transacting with digital asset mixers, which are frequently used to disguise the origin of funds.

Rogue nations, oligarchs, drug lords and human traffickers use digital assets to launder billions in stolen funds, evade sanctions and fund terrorism, Sen. Warren said. The crypto industry should follow common sense rules like banks, brokers and Western Union, and this legislation would ensure that the same standards apply to similar financial transactions. The bipartisan bill will help close the loopholes in crypto money laundering and strengthen law enforcement to better protect U.S. national security.

Senators Warren and Marshall’s push to crack down on crypto money laundering comes a day after the Department of Justice, Securities and Exchange Commission and Commodity Futures Trading Commission announced civil and criminal charges against the founder and former FTX CEO Sam Bankman-Fried. Due to time constraints, the likelihood of the bill passing in the current lame session is low. Warren and Marshall will almost certainly have to reintroduce it next year.

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