Senator Warren introduces new crypto bill targeting self-custody wallets

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In briefU.S. Senators Warren and Marshall today proposed the Digital Assets Anti-Money Laundering Act, targeting the cryptocurrency industry. The bill, which would impose new KYC requirements on cryptonet participants, has been deemed opportunistic and unconstitutional by advocacy group Coin Center.

During this week’s US Senate hearings into the collapse of FTX, Senators Elizabeth Warren and Roger Marshall today introduced the Digital Asset Anti-Money Laundering Act, which targets the cryptocurrency industry with a a number of regulatory proposals that critics say are overbearing and unconstitutional.

The proposed bill aims to impose know-your-customer (KYC) requirements on blockchain infrastructure providers and participants operating in the United States, including developers building software for decentralized networks and even miners and validators that support these networks.

Warren and Marshalls’ bill would direct the Financial Crimes Enforcement Network (FinCEN) to treat crypto wallet service providers, miners, validators and other network users as money services businesses, according to Warrens’ statement. , and would therefore require KYC for participants as well as a requirement for anti-money laundering (AML) programs.

The bill would also impact non-hosted or self-custodial crypto wallets, requiring platforms and networks to identify these customers and track their transactions. FinCEN proposed such a rule in December 2020, which many companies and crypto industry advocates have spoken out against, but it has yet to be implemented. The bill aims to finalize this process.

Additionally, the bill prohibits any financial institution from using a digital asset mixing service or other privacy-enhancing technology. Mixers are typically used to conceal cryptocurrency transactions between wallets. The best-known Ethereum mixing service, Tornado Cash, was banned by the US Treasury via sanctions in August.

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, Warren said in a statement. The bipartisan bill will help close the loopholes in crypto money laundering and strengthen law enforcement to better protect U.S. national security.

Already, the proposed bill has drawn scrutiny from the crypto industry. In a post this morning, cryptocurrency advocacy group Coin Center denounced the bill as an opportunistic and unconstitutional attack on cryptocurrency self-custodians, developers, and node operators.

The bill proposed by Senators Warren and Marshall subjecting software developers and nodes to AML is “a repudiation of liberal values ​​and a move toward the kinds of surveillance and control prized by authoritarians like Vladimir Putin, Xi Jinping and Kim Jong-un” https://t.co/s7pRKsWV2W

Peter Van Valkenburgh (@valkenburgh) December 14, 2022

The Digital Assets Anti-Money Laundering Act is a direct attack on technological progress and also a direct attack on our privacy and autonomy, Coin Center Research Director Peter Van Valkenburgh wrote.

Don’t get me wrong, despite being offered as a solution to potential money laundering and terrorist financing, the bill is actually a repudiation of liberal values ​​and a move towards the kinds of surveillance and control that are prized. by authoritarians like Vladimir Putin, Xi Jinping and Kim Jong. -one, he added.

The bill was introduced following the November collapse of cryptocurrency exchange FTX, with founder and former CEO Sam Bankman-Fried arrested this week by Bahamian police amid numerous charges. criminal cases brought by the American authorities.

Bankman-Fried faces charges from the U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC), as well as the Complex Frauds and Cybercrime Unit of the Southern District of New York U.S. Attorneys Office . Coin Center alleges that the bill would not prevent another FTX-like meltdown in the future.

This bill focuses exclusively on financial oversight and does not address any of the corporate oversight issues that led to FTX’s collapse, Van Valkenburgh wrote.

The proposed bill has received similar scrutiny to last year’s infrastructure bill, which amended the Internal Revenue Services definition of a broker to include companies that trade in crypto assets, requiring exchanges to report transactions to the government. It was feared that this bill would also affect network participants such as validators and miners, as well as crypto wallet providers and more.

Regulation focused on non-hosted wallets has also gained traction in Europe this year, with the European Union voting to impose KYC on these wallets in March, and the UK considering similar legislation this summer before finally abandoning its plans. .

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