London Daily

Focus on the big picture.
Friday, Mar 24, 2023

Elizabeth Warren’s new crypto bill sent shockwaves through the industry. Here’s what it could mean

Elizabeth Warren’s new crypto bill sent shockwaves through the industry. Here’s what it could mean

The money laundering-focused legislation could change the entire ecosystem.

On Dec. 14, as the Senate Banking Committee held a hearing on the collapse of FTX, Sen. Elizabeth Warren (D-Mass.) was late to take her seat.

As one of the highest-profile members of the committee—and an outspoken critic of crypto—it seemed unlikely she would miss the event, with witnesses including celebrity investor Kevin O’Leary and TV-star-turned-crypto-critic Ben McKenzie.

A flurry of legislative activity may have caused her delay. Earlier that day, Warren introduced a bill with Sen. Roger Marshall (R-Kans.) called the “Digital Asset Anti-Money Laundering Act of 2022,” which aims to increase financial requirements for crypto.

When Warren eventually took her seat at the hearing, her remarks were not about FTX, but instead the focus of her bill: the ways that crypto facilitates global crime.

“Crypto has become the preferred tool for terrorists, for ransomware gangs, for drug dealers, or rogue states that want to launder money,” she said.

Her bill drew immediate pushback from the industry, with the think tank Coin Center publishing a rebuttal describing it as “the most direct attack on the personal freedom and privacy of cryptocurrency users and developers we’ve yet seen.”

“Through our entire financial system, we operate on a principle that says: same kind of transaction, same kind of risks, same set of rules,” a Warren spokesperson told Fortune. “There is no reason that cryptocurrencies should be held to a lower standard that creates loopholes for criminals to launder money and finance terrorism.”

The crux of the bill brings know-your-customer rules to different players in the ecosystem—including wallet providers, miners, and node operators—and prohibits financial institutions from using privacy tools such as Tornado Cash and Monero.

Patrick Daugherty a lawyer who directs the digital assets and Web3 practice at Foley & Lardner, and teaches at Cornell Law School, discussed the pros and cons of the bill with Fortune.

On the positive side, it empowers federal financial regulatory agencies including the Treasury Department, the Securities and Exchange Commission, and the Commodity Futures Trading Commission to audit “money services businesses” for compliance.

Given the failure of FTX, Daugherty described this as the “one correct step to make,” just as the Bernie Madoff scandal created a new unit within the SEC to audit investment advisers.

On the negative side, Daugherty said that the bill overreaches in its definition of what constitutes a “money service business.” For Warren and Marshall, this could include miners, validators, and even wallet providers. As Daugherty pointed out, that could mean hardware manufacturers like Ledger.

Under the bill, these entities would have to identify customers and track their transactions, ensuring their compliance with anti-money laundering programs.

For Daugherty, banning privacy tools is a mixed bag. After the Treasury Department’s crackdown on Tornado Cash in August, regulatory clarity is desperately needed, but a total prohibition may go too far.


What’s the opposition?

Warren has long been a bogeyman for the crypto industry. Her recent bill isn’t even the first this year seeking to crack down on crypto’s role in money laundering. In March, she introduced a bill aimed at bolstering sanctions against Russia through imposing restrictions on the broader crypto ecosystem, which critics similarly called an overreach.

Coin Center’s Peter Van Valkenburgh described the recent bill as unconstitutional in two regards. The anti-privacy measures, he wrote, would violate the First Amendment by making it impossible for users to make anonymous payments, including political donations. And the bill may be deemed unconstitutional under the Fourth Amendment by “deputizing” software developers and miners to collect and report private information with a warrant.

In the bigger picture, the bill repudiates many of the core tenets of cryptocurrency—reducing the privacy elements of the ecosystem and treating its “decentralized” participants, such as miners and node operators, as centralized figures responsible for a network’s actions.

As Daugherty told Fortune, these elements of the bill could be viewed as either a bug or a feature.

“If you don't trust crypto assets at all, or if you have some philosophical opposition to them," he said, “then you will probably regard these as features.”


What's the upside?

Hilary Allen, a law professor at American University and one of the witnesses at the Senate Banking hearing last week, said that the bill closes loopholes created by crypto.

“There’s this sense in the space that technology is entirely detached from any human activity,” she told Fortune. “Software is written by people, and technology is administered by people.”

Even though advocates may argue that participants like wallet providers and validators aren't linked to transactions, Allen said they shouldn't be exempt from money laundering laws.

“If you create a technology loophole in the law, then everybody will exploit that loophole,” she added.

Allen's views reflect a skepticism that groups within the crypto ecosystem are truly decentralized—some miners, for instance, are large companies.

Crypto skeptics in Congress have said they want to ensure crypto doesn’t become intertwined with the traditional financial system, a trend that has already begun with institutions like BNY Mellon moving into the space. Allen said strict anti-money laundering laws imposed on the broader crypto ecosystem could keep it separated from traditional finance.


What about legal challenges?

“It’s unsurprising that the crypto industry is making meritless legal arguments to deflect responsibility to follow common sense anti-money laundering rules,” said the Warren spokesperson.

Allen similarly described Coin Center’s argument as “self-serving,” but there is still the open question of what would happen if the bill became law and was challenged in the court system.

With the Supreme Court’s rightward shift, there is a heavy cloud hanging over the administrative state. In this year’s landmark West Virginia v. Enviromental Protection Agency case, the Supreme Court restricted the ability of federal agencies to regulate based on congressional authorization.

If the digital assets bill became law, it would be an actual statute, not just agency action. Even so, as Allen told Fortune, the agencies would have to engage in interpretation to implement the law, which would likely end up challenged in court.


What's next?

Warren and Marshall introduced the bill into the Senate Banking Committee with the intention to re-introduce the bill during the next congressional session beginning in January.

“Senator Warren will continue working in the next Congress to pass this bipartisan legislation into law,” said the Warren spokesperson.

The bill will join a crowded field of crypto legislation. Rather than putting investor protection against free market ideals, Allen said the bill could draw bipartisan support by focusing on national security. She described it as “low-hanging fruit.”

“It’s allowed common cause to be made here,” she told Fortune.

Newsletter

Related Articles

London Daily
Close
0:00
0:00
Police violence in Paris
You're Beautiful - James Blunt (Boyce Avenue acoustic cover)
Paris: Some of the police are stepping down and showing solidarity with the protesters.
You Are So Beautiful
Donald Trump arrested – Twitter goes wild with doctored pictures
Postmodern Jukebox European Tour Version
NYPD is setting up barricades outside Manhattan Criminal Court ahead of Trump arrest.
An old French tune (by Georges Brassens) Pomplamoose ft. John Schroeder
Credit Suisse's Scandalous History Resulted in an Obvious Collapse - It's time for regulators who fail to do their job to be held accountable and serve as an example by being behind bars.
Sattahip Motor Show 20
Home Secretary Suella Braverman tours potential migrant housing in Rwanda as asylum deal remains mired in legal challenges
SONATE AU CLAIR DE LUNE - Moonlight sonata
Goldman Sachs cuts outlook for European bank debt over Credit Suisse crisis
A kiss to build a dream on
Paris Rioting vs Macron anti democratic law
Wiz Khalifa - See You Again ft. Charlie Puth, Furious
'Sexual Fantasy' Assignment At US School Outrages Parents
Wonderful Tonight - Eric Clapton (Boyce Avenue acoustic cover)
Orbán Viktor: the restructuring of the power relations in the whole of Europe is taking place
Mean Blues
Credit Suisse to borrow $54 billion from Swiss central bank
La Chansonnette
The BBC problem about China
Pattaya Addicts
Strikes-Hit UK Pledges 94 Billion Euros In Cost-Of-Living Budget
Franz Liszt - Liebestraum - Love Dream
Russian Hackers Preparing New Cyber Assault Against Ukraine
Dream a little dream of me
"Will Fly Wherever International Law Allows": US Warns Russia After Drone Incident
Tu Vuo' Fa' L'Americano - Hetty & the Jazzato Band
UK face biggest fall in spending power for 70 years
Unchained Melody sung like you've NEVER heard!
Jeremy Hunt insists his Budget will get young parents and over-50s back into work
Dave Brubeck - Take Five
If this was in Tehran, Moscow or Hong Kong
Édith Piaf - Non, Je Ne Regrette Rien (Sofie)
Announcing GPT-4
Rondo Alla Turca
TRUMP: "Standing before you today, I am the only candidate who can make this promise: I will prevent World War III."
Kiss of fire
Drew Barrymore
Ed Sheeran - Perfect (Amadeus violin cover instrumental)
China is calling out the US, UK, and Australia on their submarine pact, claiming they are going further down a dangerous road
Tom Jones - I´ll Never Fall In Love Again 1967, 1989, 2001
A brief banking situation report
Israel Cachao López - Guajira Clásica
We are witnessing widespread bank fails and the president just gave a 5 min speech then walked off camera.
Edward Maya - Stereo Love (feat. Vika Jigulina) (Extended Mix)
Donald Trump's asked by Tucker Carlson question on if the U.S. should support regime change in Russia?.
Strauss - Radetzky March - Karajan
'No relation to the American SVB': India's SVC Bank acts to calm depositors amid brand name confusion.
La vie en rose
Good news: The U.S. government is now guaranteeing all deposits, held by, Silicon Valley Bank, and the funds are available as of today
Despacito (Piano Cover) - Peter Bence
Silicon Valley Bank exec was Lehman Brothers CFO
The Temptations - My Girl (Smokey Robinson Tribute) 2006 Kennedy Cent
In a potential last-ditch effort, HSBC is considering a rescue deal to save Silicon Valley Bank UK from insolvency
Orlando Cachaito Lopez Redencion
Saudi Arabia has announced a major breakthrough in diplomacy with Iran after two years of intense talks
Edith Piaf - NON, JE NE REGRETTE RIEN
BBC Director General, Tim Davie, has apologized, but not resigned, yet, following the disruption of sports programmes over the weekend
RADETZKY MARCH-2008-Wien, New Year Concert
A Mississippian man, who was once considered a “ticking time bomb,” has lost a whopping 165 kilograms! What motivated this incredible transformation?
Only you (And you alone)
Elon Musk Is Planning To Build A Town In Texas For His Employees
Beautiful in White x Canon in D (Piano Cover by Riyandi Kusuma)
The Silicon Valley Bank’s collapse effect is spreading around the world, affecting startup companies across the globe
Strangers In The Night
City officials in Berlin announced on Thursday that all swimmers at public pools will soon be allowed to swim topless
Charles Aznavour - La Boheme
Fitness scam
Summer time
Market Chaos as USDC Loses Peg to USD after $3.3 Billion Reserves Held by Silicon Valley Bank Closed.
Sting and Stevie Wonder - Fragile (from Sting's 60th birthday concert)
A primitive judge in Australia sparked outrage when he told a breastfeeding woman to leave his courtroom for being “a distraction"
Aux Champs Elysees
Barcelona is feeling the heat as they face corruption charges over payments to former vice-president of Spain's referees' committee, Jose Maria Enriquez Negreira
Stand By Me - Ben E. King (Boyce Avenue acoustic cover)
Banking regulators close SVB, the largest bank failure since the financial crisis
La Mer (Beyond the Sea) – Avalon Jazz Band
Watch: “They are wounded but unbowed, unbreakable.”
She
Silicon Valley Bank: Struggles Threaten Tech Startup Ecosystem"
Nathalie Song by Enzo Petrachi Stjepan Hauser Cello
The unelected UK Prime Minister Rishi Sunak, an immigrant himself, defends new controversial crackdown on illegal migration
Shape of My Heart - Sting (Boyce Avenue acoustic cover)
Old clip of Bill Gates saying Ukraine is a big, fat, corrupt sinkhole is going viral
Radiohead - Creep
Man’s penis amputated by mistake after he’s wrongly diagnosed with a tumour
Quizás,Quizás,Quizás - Andrea Bocelli - Jennifer Lopez
Motorist fined £650 after council ‘paints disabled bay around his car
Perhaps, Perhaps, Perhaps - Multi-Couples
Brexit Deal Falls Short: UK Regains Few Pre-Brexit Benefits
Pentatonix Havana
In a major snub to Downing Street's Silicon Valley dreams, UK chip giant Arm has dealt a serious blow to the government's economic strategy by opting for a US listing
Paula Cole - Autumn Leaves
Brexit is done (sort of), again
Oscar Benton Bensonhurst Blues
JP Morgan Becomes First Bank to Predict UK Will Avoid Recession
OH NANANA vs ABUSADAMENTE
Nina Simone - ”I Put A Spell On You”. Vezi aici cum cântă Jeremy Ragsd
NIGHTWISH - The Phantom Of The Opera
Motorshow 2016 Tanjay Negros Oriental
Monica Bellucci - Ti Amo
Michael Jackson - Billie Jean Milena The Voice France 2018
Michael Buble (Help Me Make It Through The Night) feat Loren Allred
Memories Canon In D - Maroon 5 (Boyce Avenue piano acoustic cover)
Matteo Simoni - Marina
Maroon 5 - One More Night
Maroon 5 - Memories
Mark Knopfler - Brothers In Arms (Berlin 2007 Live)
Mark Knopfler & Emmylou Harris - Romeo And Juliet (Real Live Roadrunni
Marina, Marina - The LUCKY DUCKIES intimist live concert at Guimarães
Major Lazer & DJ Snake – Lean On Mauranne The Voice France 2016
Love Theme from Romeo and Juliet - Joslin - Henri Mancini, Nino Rota
LoLa & Hauser - Love Story
Linkin Park Jay-Z - Numb Encore (Live 8 2005)
Hallelujah Mennel Ibtissem, The Voice France Leonard Cohen
Leonard Cohen - Dance Me to the End of Love
Leonard Cohen & Natasha Rostova - Dance me to the end of love
La casa de papel - Bella Ciao
La Camisa Negra
L'italiano (Toto Cutugno) - The Gypsy Queens
Juanes - La Camisa Negra
Jonathan and Charlotte - Britain's Got Talent 2012 Live Semi Final - U
John Powell - Assassin's Tango
Joe Cocker - You Can Leave Your Hat On (LIVE in Dortmund)
Joe Cocker - Unchain My Heart 2002 Live
Joe Cocker - A Whiter Shade Of Pale
Jay Z & Alicia Keys - Empire State of Mind LIVE
Jason Mraz - Im Yours (live)
Jarrod Radnich - Bohemian Rhapsody - Virtuosic Piano Solo
James Blunt - You're Beautiful
James Blunt - You're Beautiful & Bonfire Heart (Live at The Nobel Peac)
If You Go Away - Helen Merrill & Stan Getz (Tribute to Virna Lisi)
I'LL BE MISSING YOU
I Say a Little Prayer
Hotel California ( Eagles ) 1994 Live
Historia de un amor - Luz Casal. Vezi interpretarea Biancăi Sumanariu
Here Comes The Sun - The Beatles (Boyce Avenue acoustic cover) on Spot
Heart - Stairway to Heaven Led Zeppelin - Kennedy Center Honors
HAVANA by Camila Cabello Zumba Pre Cooldown TML Crew Kramer Pastra
HAUSER and Señorita - I Will Always Love You
HAUSER - Waka Waka
HAUSER - Sway
HAUSER - Lambada
HAUSER - Historia de un Amor
HAUSER - Despacito
Great Pretender
Georgia May Foote & Giovanni Pernice Samba to 'Volare' - Strictly Come
Gary Moore - Still Got The Blues
GIPSY KINGS VOLARE Penelope Cruz
Fugees - Killing Me Softly With His Song
French Latino - Historia de un Amor
For A Few Dollars More The Danish National Symphony Orchestra (Live)
Flashdance • What a Feeling • Irene Cara
Filip Rudan - “Someone You Loved” Audicija 4 The Voice Hrvatska Sez
Eric Clapton - Wonderful Tonight
Enya - Only Time
Enrique Iglesias - Bailando (English Version) ft. Sean Paul
Enrique Iglesias - Bailamos
Elena Yerevan Historia de un amor
Ed Sheeran - Shape of You (Official Music Video)
Ed Sheeran - Perfect Symphony [with Andrea Bocelli]
Ed Sheeran - Perfect (Official Music Video)
Easy On Me - Adele (Boyce Avenue 90’s style piano acoustic cover) on S
ERA - Ameno
ELENA YEREVAN- Cancion Del Mariachi-IN STUDIO-2017 DPR
Dust In The Wind - Kansas (Boyce Avenue acoustic cover)
Don't Let Me Be Misunderstood
Despacito x Shape Of You - Pentatonix
Deep Purple - Child In Time - Live (1970)
David Foster When A Man Loves A WomanIt's A Mans World (SealMichael Bo
Dance me to the end of Love ( Pi-Air Design )
Coolio - Gangsta's Paradise (feat. L.V.) [Official Music Video]
Conquest Of Paradise (Vangelis), played on Böhm Emporio organ
Cielito Lindo
Chico & The Gypsies - Bamboleo
Canción Del Mariachi - Antonio Banderas, Los Lobos • Desperado
Camila Cabello - Havana (Audio) ft. Young Thug
Camila Cabello - Havana ( cover by J.Fla )
California Dreamin' - The Mamas & The Papas José Feliciano (Boyce Ave
Buster Benton - Money Is The Name of The Game
Hallelujah Pentatonix
Bobby McFerrin - Don't Worry Be Happy (Official Music Video)
Bob Dylan - Knockin' On Heaven's Door Emilia The Voice Kids France
Besame Mucho - Cesaria Evora
Ben E. King - Stand by Me Sax Cover Alexandra Ilieva Thomann
Bella Ciao
Bella Ciao - INSTRUMENTAL
Beautiful in White x Canon in D (Piano Cover by Riyandi Kusuma)
Bad Romance - Vintage 1920's Gatsby Style Lady Gaga Cover ft. Ariana Savalas & Sarah Reich(1)
BELLA CIAO 2020 - KARAOKE ITALIANO
BAMBOLEO - Gipsy Kings • Antonio Banderas, Katya Virshilas
BAILANDO (original)
Awesome Ukrainian yodeler - SOFIA SHKIDCHENKO (with English subtitles)
Avicii - The Nights
Atom - The Great Gig in the Sky
Aretha Franklin - (You Make Me Feel Like) A Natural Woman (Official Ly
Antonio Banderas - Cancion del Mariachi (Desperado)
André Rieu - Zorba's Dance (Sirtaki)
André Rieu - Can't Help Falling In Love
André Rieu & Mirusia - Ave Maria
Andrew Reyes Elton John - Don't Let The Sun Go Down The Voice 2020 (
Andreas Kümmert Whiter Shade Of Pale The Voice of Germany 2013 Showd
And I Love You So
All About That Bass - Postmodern Jukebox European Tour Version
Alan Walker - Faded (Piano Cover)
Ain't No Sunshine -- Bill Withers (cover by Canen 12 y.o.)
African music
Adriana Vidović - “Creep” Audicija 4 The Voice Hrvatska Sezona 3
Adriana Vidović - “Believer” Nokaut 3 The Voice Hrvatska Sezona 3
A Fistful of Dollars - The Danish National Symphony Orchestra and Tuva
4 Beautiful Soundtracks Relaxing Piano [10min]
2CELLOS - Whole Lotta Love vs. Beethoven 5th Symphony [OFFICIAL VIDEO]
2CELLOS - Smooth Criminal (Live at Suntory Hall, Tokyo)
2CELLOS - Smells Like Teen Spirit [Live at Sydney Opera House]
2CELLOS - Despacito [OFFICIAL VIDEO]
13 Year Old Girl Playing Il Silenzio (The Silence) - André Rieu
094.All About That Bass
00 - SADNESS PART 1
(Ghost) Riders In the Sky (American Outlaws Live at Nassau Coliseum, 1
(Everything I Do) I Do It For You - Bryan Adams (Boyce Avenue ft. Conn
What a wonderful world
Moon river
×