As the crypto world focused on the novel unfolding around FTX, Senators Elizabeth Warren and Roger Marshall introduced the “Digital Assets Anti-Money Laundering Act of 2022” on December 14. The seven-page bill would expand the classification of money service businesses (MSBs), prohibit financial institutions from using technology like digital asset mixers, and regulate digital asset kiosks, also known as automated teller machines (ATMs). ).
In announcing the bill’s submission to the Senate Banking Committee hearing on “Crypto Crash: Why the FTX Bubble Burst and the Harm to Consumers”, Warren, an outspoken cryptocurrency skeptic, said:
“Senator Marshall and I are introducing a bipartisan bill today that requires cryptocurrencies to follow the same money laundering standards that all banks, all stock brokers and Western Union have to follow today.”
Under the legislation, money service companies, a classification created by the Financial Crimes Enforcement Network (FinCEN), would be “custodial and non-custodial wallet providers, cryptocurrency miners, validators, or other nodes that may act to validate or secure third-party transactions, independent network participants, including MEV seekers [valor máximo extraíble]and other validators with control over network protocols”.
Unhosted wallets, miners, and validators were not previously considered MSBs.
Money service businesses would be required to have written anti-money laundering policies and enforce them. The bill would complete the reporting requirements already proposed by FinCEN and would impose new ones, such as reporting transactions over $10,000 under the Bank Secrecy Act.
The bill also directs the Treasury Department to create a rule that prohibits financial institutions from interacting with “Digital asset shufflers, privacy coins, and other anonymity-enhancing technologies.”
It would require the Treasury Department, the Securities and Exchange Commission, and the Commodity Futures Trading Commission to establish review processes for the entities they each regulate.
Finally, the bill would create reporting requirements for digital asset kiosk owners and for FinCEN and the Drug Enforcement Administration.
Like the lawmaker duo, Cynthia Lummis and Kirsten Gillibrand, authors of the Responsible Financial Innovation Act, Warren and Marshall represent opposite ends of the American political spectrum. Warren is a liberal Democrat from Massachusetts, while Marshall is a conservative Republican from Kansas.
“I am delighted to see Senator Warren acting in a bipartisan manner by joining Senator Marshall in introducing this bill,” Patrick Daugherty, head of Foley & Lardner’s digital assets practice and an adjunct professor of digital assets at Cornell Law School, told Cointelegraph in a statement.
Daugherty acknowledged the “healthy effect of the bill to further prevent the misuse of digital assets for criminal purposes,” but expressed concern about “the loss of financial privacy for millions of non-criminal buyers and sellers of digital assets.”
Casey Jenkins, Seward & Kissel attorney and former member of the Consumer Financial Protection Bureau, told Cointelegraph that the bill could have “far-reaching ramifications” for the MSBs. The ban on institutions interacting with digital mixers, defined in the bill as “a website, software or other service designed to conceal or obfuscate the origin, destination and counterparties of digital asset transactions”, would amount to a ban on mixers and privacy coins.
The requirement that miners and validators perform due diligence is also potentially problematic. “The miners and validators are not prepared to perform the new functions that this legislation would impose on them. They are not banks or stockbrokers, who already have staff for this function,” Daugherty said.
This bill by @SenWarren and @RogerMarshallMD is the most significant attack on digital freedom i’ve ever seen.
It turns validators into money services businesses
It bans financial privacy
It turns America into a full on surveillance state
This is how western democracies die pic.twitter.com/XM1JjM0uL0
— RYAN SΞAN ADAMS – rsa.eth (@RyanSAdams) December 14, 2022
According to Jenkins, the bill seemed “impromptu at the last minute” and pretended “set the tone” for future debates in Congress. There is no possibility that it will be studied in this session.
Warren has also promised to draft comprehensive legislation on the regulation of cryptocurrencies that, would reportedly favor the SEC in the role of regulator.
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