Should regulations aimed at stopping the financial activities of alleged criminals and terrorists be significantly expanded to include cryptocurrencies and the companies that use them? Could it compromise consumers’ freedom to deal with it?
These are the questions being asked in Washington this week that will have global implications as Treasury officials explore new tools to regulate and track bitcoin and cryptocurrencies. Estimation 50 million Americans use them.
On Tuesday, the Senate Banking Committee held a meeting. supervisory hearing Deputy Treasury Secretary Wally Adeyemo has proposed a series of rule changes to more tightly regulate the cryptocurrency activities of alleged criminals.
of 3 main proposals The Treasury Department is seeking to develop sanctions protocols for foreign digital asset providers through the Office of Foreign Assets Control, expand existing money laundering rules applicable to U.S. virtual currency exchanges, and impose similar restrictions. It is likely that they will somehow acquire the authority to apply to foreign virtual currency exchanges. American coast.
Government officials have justified these new powers by pointing to reports of cryptocurrency activity by groups like Hamas. we reported In addition to being highly exaggerated and technically inaccurate, there was also some activity related to gift card and cryptocurrency exchange activities used by people sympathetic to al-Qaeda and the Islamic Revolutionary Guard Corps.
these An example of the latter The FBI and the Department of Homeland Security were able to use existing law to stop and stop it.Also, these groups and money laundering suspect Those operating in Türkiye had enough to secure criminal charges.
There is no question that our government should pursue terrorist activities and financing, but significantly expanded powers over crypto providers could lead to increased enforcement and more bad actors caught. There is little evidence that it will. Especially when the majority of illegal financing of criminal activities still uses the traditional financial system and the US dollar as the national treasury. Admitted itself.
In response to a request from the Treasury Department, a new bill, called the ENFORCE Act, has been introduced that would extend existing money laundering rules to the crypto sector, making them even stricter than those applicable to traditional fiat currencies.
This applies to crypto custodians, money transmitters, and exchanges, but thankfully services that only provide non-custodial and peer-to-peer services will be exempt.
of proposed draftThe bill, authored by Sen. Thom Tillis (R-North Carolina) and Sen. Bill Hagerty (R-Tenn.), would require digital asset institutions to ensure compliance with security measures and verify all customer information. The law requires companies to maintain a robust anti-money laundering program to ensure that they maintain a robust anti-money laundering program.
They will also be required to file a suspicious activity report with the Financial Crimes Enforcement Network for a fee starting at $2,000 for any “suspicious transaction that appears to be a potential violation of any law or regulation.” This overly broad definition extends to any virtual currency transaction that “does not serve a business or obvious legal purpose” as determined by the virtual currency exchange, and the virtual currency exchange will withhold the information in this report from its customers. will be legally required.
Although this bill is much less stringent than before, similar proposal Anti-crypto advocate Sen. Elizabeth Warren argued that it would provide crypto companies with stricter rules and procedures than the traditional banking sector.
For the average American consumer and user of cryptocurrencies in custodial services, it means that Coinbase is subject to lower standards and more scrutiny and oversight than Bank of America. means.
Rather than accepting the unauthorized innovations offered by Bitcoin and its crypto descendants, these rules will force even stronger financial oversight and regulatory compliance on the next version of digital money, allowing the growth of this industry. This will be artificially obstructed.
And as financial institutions choose to cut off customers’ access to services rather than comply with unreasonable requests to report suspicious activity for transactions over $1, even more Americans They will likely get caught up in the dragnet of banks. As we have already seen in the traditional banking system, the threshold is small.
These reports have no inherent legitimacy or process, other than the broad circumstantial processes outlined in the Bank Secrecy Act and Anti-Money Laundering Act, which is problematic for many bank customers. Masu. Account is closed or suspended without going through due process. Many of them are minorities and are likely to be unbanked. politically active or religious group.
This measure will apply to virtual currencies with a ridiculous limit of $2,000. exceeds the average rent paid In several states — indicating the government’s intention to restrict cryptocurrency activities of law-abiding citizens without formal criminal charges.
In addition to tightening financial regulations and forcing financial institutions to restrict access for Americans both domestically and abroad, the bill also means citizens who wish to participate in the cryptocurrency sector risk being actively rejected. do.
To go after criminals and terrorists, lawmakers are expanding definitions and leveraging their natural right to use new-age digital assets like Bitcoin and its descendants against ordinary Americans. We are trying to strengthen government action.
Regardless of what this bill or future legislation requires, non-custodial solutions and peer-to-peer transactions without intermediaries must remain a focus to expand the adoption of Bitcoin and other cryptocurrencies. That’s clear.
This would empower people who can hold their own private keys, generate addresses, and protect their wealth, but millions of Americans who technically cannot use these tools. It can disenfranchise people and hinder future innovation by entrepreneurs who want to provide services. those solutions.
Regulatory frameworks for digital assets will continue to be essential, but they should not come at the expense of the very reason these technologies were invented: the separation of money and state.
Yael Osowski is deputy director of the Consumer Choice Center and a visiting fellow at the Bitcoin Policy Institute.
