New bill to monitor Bitcoin self-custody wallets like hardware wallets by government

  • Senator Liz Warren sponsored bill seeks to block all possible means that bad actors use to launder money through the crypto industry.
  • The digital asset anti-money laundering act will introduce anti-money laundering policies into the crypto sector, similar to traditional finance.

Popular crypto critic and outspoken US Senator Elizabeth Warren have proffered a solution to the rising spate of crypto-related crimes. Warren and fellow senator Roger Marshall recently sponsored a bipartisan bill known as “The Digital Asset Anti-Money Laundering Act.” The primary aim of the bill is to curb the use of cryptocurrencies for money laundering purposes.

According to a CNN report, the jointly sponsored bill by Warren and Marshall seeks to block all possible means that bad actors use to launder money through the crypto industry. The newly sponsored bill is one of the regulatory responses to the crash of the FTX crypto exchange. The DoJ had earlier argued that Sam Bankman-Fried used his exchange for several financial crimes, including money laundering purposes.

However, the CNN report stated that it is unlikely that the bill will make it through the present congress due to limited time. The ongoing congress meeting won’t end until January 3, 2023. Hence, co-sponsors of the bill would have to re-introduce it at the next us congress session for proper deliberation.

While speaking during an earlier interview with CNN, Warren said,

I’ve been telling my fellow senators about problems these cryptos can pose. That’s why I plan to sponsor a bipartisan bill that suggest simple crypto rules to better protect us national security.

The popular crypto critic also spoke about the recent FTX crash, saying the current charges leveled against Sam Bankman-Fried and other events and revelations (especially in the political scene) that have happened since the exchange’s collapse prove that the digital asset space isn’t under any serious scrutiny political-wise.

The bill follows the fast rise in crypto-related money laundering operations. Many bad actors use crypto to commit financial crimes because crypto’s underlying technology (blockchain technology) offers a decent level of anonymity. However, there hasn’t been adequate regulation of the crypto space because it is still a growing sector.

After the Treasury Department issued a ban on the crypto mixer Tornado Cash in August, it emphasized the need to regulate the crypto space due to the rising level of crypto-related money laundering activities.

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What’s included in the bill

The digital asset anti-money laundering act will introduce anti-money laundering policies into the crypto sector, similar to traditional finance. Hence, crypto platforms and traditional finance firms will be subject to similar anti-money laundering policies.

Once the lawmakers pass the bill, a bureau within the treasury department (the financial crimes enforcement network, FinCEN) will be authorized to enforce the regulation on crypto platforms, including wallet providers and miners. Also, the approval of the bill means crypto platforms are subject to the provisions in the 1970 bank secrecy act, an act that includes know-your-customer (KYC) policies.

Hence, American financial watchdogs can enforce the full provision of the act on crypto firms, especially the areas that bad actors exploit for money laundering purposes. Also, the bill’s approval means the FinCEN can enforce a 2020 guideline that mandates traditional finance and crypto service providers to maintain proper customer records, including verifying IDs and reporting all activities connected with unhosted accounts.

Other aspects of the bill are that:

  • US residents must file reports of transactions exceeding $10,000 with the internal revenue service (IRS).
  • financial service providers, including banks, cannot operate or interact with technologies that promote anonymity. For example, crypto mixers.
  • financial watchdogs must ensure that players in the financial service industry comply with the bank secrecy act by performing routine compliance checks on these firms.
  • where necessary, crypto ATM operators must report the actual locations of their kiosks.

While commenting on the matter, co-sponsor of the bill, senator Marshall, said the US authorities have been enacting useful reforms to help banks prevent bad actors from operating in the nation’s financial space after the September 11, 2001, terrorist attacks.

Marshall added that these reforms should also apply to the crypto industry as they are an efficient solution to stop money laundering operations through crypto without restricting access to crypto services by the right persons.