More bad news for crypto investors and users. US Senators are cracking down on the usage of digital assets with a newly proposed Digital Asset Anti-Money Laundering Act.
“Digital Asset Anti-Money Laundering Act” explained
US Senators Elizabeth Warren alongside Roger Marshall introduced a new bill, called the Digital Asset Anti-Money Laundering Act Of 2022. This new law, if enacted, will take a closer look at money laundering, terrorism financing, and other illegal activities that crypto is being criticized for by most governments.
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If passed, the new law would require wallet providers and miners in the crypto industry to conduct know-your-customer (KYC) forms and would ban financial institutions from conducting business with digital asset mixers like Tornado Cash.
The new proposed act is seen as “the most direct attack on the personal freedom and privacy of cryptocurrency users and developers” by Coin Center. This is because anyone who helps maintain a public blockchain would be forced to sign up as a Financial Institution (FI).
These FIs would be required to:
- file reports about their users without a warrant, government request, or probable cause as a trigger
- collect and store the personal information of every person who uses their software or sends transactions over their internet-connected computers
- develop risk-calibrated AML programs that block persons from using their software or network throughput if they suspect those persons are moving funds related to crime
The drafters of this law intend to impose regulation on a wide range of noncustodial entities, including software developers, node operators, and many others. Put another way, the bill was written in such a way as to make permissionless blockchains unavailable to Americans by requiring all validators and developers of such networks to gate and monitor their infrastructure.
Their goal is to prevent Americans from using any technology that provides them with privacy or control over their online transactions. If this legislation were to become law, American citizens would only be able to use cryptocurrencies in a highly controlled and closely monitored setting. This is certainly not something crypto users want.
As part of the act, the Financial Crimes Enforcement Network (FinCEN) would be able to implement a proposed rule requiring institutions to report certain transactions. These could involve unhosted wallets or wallets where the user has complete control over the contents without depending on an exchange or other third party. Goodbye to Metamask and other similar wallets?
“This bill is focused exclusively on financial surveillance and does not address any of the issues of corporate control that led to the collapse of FTX,” Coin Center stated.
Self-custody of digital assets, which protects users from the kind of counterparty risk illustrated by the FTX crash, would be effectively prohibited by this bill. Consumers who are interested in owning or using cryptocurrencies will be put at risk rather than protected by the bill because it will prohibit them from having a choice and control over their own assets.
Moreover, this act might violate the fourth amendment of the US constitution because it orders the surveillance of cryptocurrency a tort.
While the senators obviously try to reduce illegal activities through crypto regulations, which are needed, this act could actually harm its users more than protect them. Government officials are trying to “protect users” forcibly, but it looks like they don’t see the whole picture.
This law hasn’t been passed yet, however, it made a lot of noise in the crypto community as it violates the right to personal privacy. It goes as far as saying this is close to surveillance by authoritarians like Xi Jinping or Kim Jong-un.