Sens. Warren and Marshall introduce new money-laundering legislation for crypto

As the cryptosphere centered on the drama unfolding round FTX, United States Senators Elizabeth Warren and Roger Marshall launched the Digital Asset Anti-Money Laundering Act of 2022 on Dec. 14. The seven-page invoice would develop the classification of a cash service enterprise (MSB), prohibit monetary establishments from utilizing know-how akin to digital asset mixers, and regulate digital asset kiosks, in any other case often called automated teller machines, or ATMs.

Announcing the introduction of the invoice on the Senate Banking Committee listening to “Crypto Crash: Why the FTX Bubble Burst and the Harm to Consumers,” Warren, a vocal crypto critic, stated:

“Senator Marshall and I launched a bipartisan invoice at this time that requires crypto to comply with the identical money-laundering guidelines as each financial institution, each dealer and Western Union all should comply with at this time.”

Under the legislation, cash service companies, a classification created by the Financial Crimes Enforcement Network (FinCEN), can be “custodial and unhosted pockets suppliers, cryptocurrency miners, validators, or different nodes who might act to validate or safe third-party transactions, impartial community contributors, together with MEV [maximum extractable value] searchers, and different validators with management over community protocols.”

Unhosted wallets, miners and validators weren’t earlier thought of MSBs.

Money service companies can be required to have written Anti-Money Laundering insurance policies and to implement them. The invoice would finalize reporting necessities already proposed by FinCEN and impose new necessities, together with reporting transactions over $10,000 in accordance with the Bank Secrecy Act.

The invoice additionally instructs the Treasury Department to create a rule banning monetary establishments from interacting with “digital asset mixers, privateness cash, and different anonymity-enhancing applied sciences.”

It would require the Treasury Department, Securities and Exchange Commission and Commodity Futures Trading Commission to arrange assessment processes for the entities that every regulates.

Finally, the invoice would create reporting necessities for house owners of digital asset kiosks and for FinCEN and the Drug Enforcement Administration.

Related: Institutional crypto adoption requires sturdy analytics for cash laundering

Somewhat just like the legislative duo Cynthia Lummis and Kirsten Gillibrand, who authored the Responsible Financial Innovation Act, Warren and Marshall characterize reverse ends of the U.S. political spectrum. Warren is a liberal Democrat from Massachusetts, whereas Marshall is a conservative Kansas Republican.

“I’m delighted to see Senator Warren appearing in a bipartisan method by becoming a member of with Senator Marshall within the introduction of this invoice,” Patrick Daugherty, head of Foley & Lardner’s digital asset apply and adjunct professor of digital belongings at Cornell Law School, instructed Cointelegraph in an announcement.

Daugherty acknowledged the invoice’s “salutary impact of impeding extra totally the abuse of digital belongings for crime” however expressed concern about “the lack of monetary privateness for thousands and thousands of digital asset consumers and sellers who should not criminals.”

Casey Jenkins, counsel at Seward & Kissel and former Consumer Financial Protection Bureau staffer, instructed Cointelegraph that the invoice may have “sweeping ramifications” for MSBs. The prohibition of establishments from interacting with digital mixers — outlined within the invoice as “an internet site, software program, or different service designed to hide or obfuscate the origin, vacation spot, and counterparties of digital asset transactions” — would quantity to a ban on mixers and privateness cash.

The requirement that miners and validators do due diligence can be doubtlessly problematic. “Miners and validators should not geared up to carry out the new duties that this legislation would thrust upon them. They aren’t banks or brokers, that are already staffed up for this perform,” Daugherty stated.

The invoice gave the impression to be “thrown collectively on the final minute,” Jenkins stated, and supposed to “set the tone” for additional dialogue in Congress. It has no likelihood of being thought of on this session.

Warren has additionally promised to write down complete crypto regulation legislation that reportedly would favor the SEC within the function of regulator.