Warren-Marshall Bill attacked as a ‘direct attack’ on crypto users

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Senators Say Legislation Needed to Combat Money Laundering and Criminal Use of Cryptocurrencies

This is the biggest legislative threat to crypto.

That’s the conclusion drawn by Coin Center, the cryptocurrency industry think tank, after analyzing a bill introduced Wednesday by Sen. Elizabeth Warren (D-Mass.) and Sen. Roger Marshall ( R-Kan.).

KYC requirements

In an effort to bring crypto into the regulatory regime governing TradFi, the bill would extend know-your-customer requirements to crypto wallet providers, miners, validators, and other network participants who may act to validate, secure or facilitate digital asset transactions. These businesses would be referred to as money services businesses.

The Digital Assets Anti-Money Laundering Act would also prohibit financial institutions from using a Tornado Cash-like mixer or other anonymity-enhancing technologies and from using crypto that has passed through such protocols. . The bipartisan bill will help close the loopholes in crypto money laundering and strengthen law enforcement to better protect U.S. national security.

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By targeting anonymity, the senators are trampling on one of the most cherished values ​​of cryptocurrency privacy. Yet they argue that this step is necessary to curb the criminal use of cryptocurrencies.

Rogue nations, oligarchs, drug barons and human traffickers use digital assets to launder billions in stolen funds, evade sanctions and fund terrorism, Warren said in a prepared statement. 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.

Individual liberty

Still, Coin Center said this was a classic case of Washington hype. [The bill] is the most direct attack on the personal freedom and privacy of cryptocurrency users and developers that we have ever seen, the research advocacy nonprofit said. This would require anyone helping to maintain public blockchain infrastructure, either through software development or validating transactions on the network, to register as a financial institution (FI).

Warren and Marshall picked their moment well. The two senators introduced the bill a day after U.S. prosecutors charged Sam Bankman-Fried with eight counts of fraud, conspiracy and violation of campaign finance laws in connection with his handling of FTX .

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The U.S. Securities and Exchange Commission and Commodity Futures Trading Commission have also accused Bankman-Fried of defrauding investors since 2019 by using client assets to cover losses and margin calls from Alameda Research, the crypto hedge fund that the 30-year-old entrepreneur controlled.

Coin Center said the bill would not prevent the upcoming FTX. He called the proposed bill an opportunistic and unconstitutional attack on the Autonomous Custody, developers and operators of cryptocurrency nodes, as well as the most direct attack on the personal freedom and privacy of users and cryptocurrency developers we have ever seen.

Earlier this year, crypto die-hards denounced the Digital Products Consumer Protection Act, a Bankman-Fried-backed bipartisan bill, for including provisions they said would kill DeFi.

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Bankman-Fried and crypto lobbyists have pointed out that this is not the intent of the bill and that this wording will be changed by the time the bill reaches a final version. The bills’ chances of passing this year evaporated after FTX’s collapse and scrutiny of all things Bankman-Fried, Fortune reported, though the bill is expected to be reintroduced next year. next.

Coin Center referenced the DCCPA in its withdrawal from the Warren-Marshall bill on Wednesday.

We have been vocal critics of legislation that unknowingly or unwittingly sweeps up noncustodial infrastructure providers and software developers in financial services oversight and regulation, he writes.

Non-custodial entities

The Warren-Marshall bill is different.

The drafters intend to impose licensing regulations on software developers and node operators, as well as a long list of similar non-custodial entities, according to Coin Center. In other words, the bill was deliberately designed to make permissionless blockchains unavailable to Americans by forcing all validators and developers on these networks to control and monitor their infrastructure.

Warren, a former professor of bankruptcy law at Harvard University, is one of the most vocal critics of cryptography among lawmakers and frequently points to its use in fraud, cybercrime and evading sanctions.

The bill was deliberately designed to make permissionless blockchains unavailable to Americans by forcing all validators and developers on these networks to control and monitor their infrastructure.

Coin center

A one-page document outlining the bill cites a report from crypto forensics firm Chainalysis. This report found that cryptocurrency-based crime hit an all-time high last year, with illicit addresses receiving $14 billion, up from $7.8 billion in 2020.

The same report, however, notes that the growth in crypto crime was overtaken last year by the growth in the overall use of crypto. As such, the share of illicit activity in cryptocurrency transaction volume has never been lower, accounting for less than a fifth of one percent of all crypto transactions in 2021, according to Chainalysis.

No action

Warren is the only senator to receive an F rating from the Crypto Action Network, a nonprofit organization funded by Coinbase. Roger Marshall was among many lawmakers who did not receive a rating due to a lack of action regarding cryptocurrency.

Following the terrorist attacks of September 11, 2001, our government enacted significant reforms that helped banks weed out bad actors from the U.S. financial system, Marshall said in a prepared 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.

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