(Kitco News) - The push to regulate the cryptocurrency market in the wake of FTX’s implosion is charging full steam ahead, with the latest move coming from U.S. Senators Elizabeth Warren, D-Mass., and Roger Marshall, R-Kan., who have introduced legislation designed to tighten the U.S. anti-money laundering rules related to digital assets.
Based on the text of the “Digital Asset Anti-Money Laundering Act of 2022,” the Senators are looking to expand know-your-customer rules to wallet providers, miners, validators and other network participants and prohibit the use of cryptocurrency mixers by financial institutions.
A cryptocurrency mixer – such as Tornado Cash, which was sanctioned by the Treasury Department back in August – is a protocol that allows crypto holders to deposit a token like Ether into a pool, which is then mixed with all the other Ether in the pool and randomly redistributed to pool’s participants. This helps to conceal where the tokens originated from, making it a popular service among crypto hackers and scammers.
While the push to regulate crypto has become a focal point over the past month, the bipartisan legislation is unlikely to become law during this Congress and will most likely be reintroduced after the next Congress starts in January.
Among other things, the bill is seeking to require any U.S. person who conducts a digital asset transaction with a value greater than $10,000 through one or more accounts outside of the U.S. to file a report on that transaction.
It’s also looking to have the Secretary of the Treasury issue a rule that prohibits financial institutions from “handling, using, or transacting business with digital asset mixers, privacy coins, and other anonymity-enhancing technologies, as specified by the Secretary; and handling, using, or transacting business with digital assets that have been anonymized.”
Another requirement laid out in the bill includes a directive for the Treasury Department to establish a risk-focused examination and review process for money service businesses that will assess “the adequacy of anti-money laundering programs and reporting obligations, [...] and compliance with anti-money laundering and countering the financing of terrorism requirements.”
Both the Securities and Exchange Commission and Commodity Futures Trading Commission are likewise ordered to establish a similar examination and review process for crypto-related businesses that fall under their jurisdiction.
|
| FTX fallout motivates the FSB to release global crypto regulation recommendations in early 2023 |
If the bill is enacted, digital asset kiosk (ATM) owners will be required to submit and update the physical addresses of the kiosks every 3 months. They are also mandated to verify the identity of each customer using a valid form of government-issued identification and collect the name, date of birth, physical address, and phone number of each counterparty to the transaction.
“Following the September 11, 2001, terrorist attacks, our government enacted meaningful reforms that helped the banks cut off bad actors’ from America’s financial system. Applying these similar policies to cryptocurrency exchanges will prevent digital assets from being abused to finance illegal activities without limiting law-abiding American citizens’ access,” Senator Marshall said in a statement released alongside the bill. “Our common-sense bill will make it harder for criminals to finance their criminal activities, like the trafficking of illicit fentanyl through the dark web, that can harm innocent Kansans.”
Senator Warren followed those remarks by saying that “The crypto industry should follow common-sense rules like banks, brokers, and Western Union, and this legislation would ensure the same standards apply across similar financial transactions. The bipartisan bill will help close crypto money laundering loopholes and strengthen enforcement to better safeguard U.S. national security.”
