The crypto industry has experienced unprecedented setbacks this year, from TerraUSD's crash to the recent FTX collapse, impacting millions of common investors. Yet, crypto enthusiasts don't budge from their strong conviction that digital assets will change the world for good.
However, such events did give ammo to crypto critics, who call cryptocurrencies a mere instrument for money laundering, terrorism financing, and all the evils in the world. One of the most vocal crypto critics, Sen. Elizabeth Warren, recently issued a statement while introducing the Digital Asset Anti-Money Laundering Act of 2022.
She rejected everything the crypto industry has achieved in over a decade-long existence in her blanket statement: “Rogue nations, oligarchs, drug lords, and human traffickers are using digital assets to launder billions in stolen funds, evade sanctions, and finance terrorism.”
As per Sen. Warren, the proposed bill’s goal is to bring the crypto industry on par with the traditional financial sector as far as compliance is concerned and prevent malicious actors from abusing digital assets for money laundering and terrorist financing.
In her own words, “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.”
But what do numbers say? Is crypto really powering a majority of illicit trade globally? Well, the statistics portray a totally opposite picture. As per Chainanalysis's Crypto Crime Trends for 2022 report, a mere 0.15% of crypto transaction volume was for illicit use.
The bill considers unhosted wallets, miners, and validators as a money service business (MSB), which has horrified the crypto industry, as decentralized crypto parties and projects haven't been considered MSB before. If the proposed bill becomes a law, even decentralized crypto service providers and participants will have to comply with KYC requirements and obtain the necessary information from their users while onboarding.
It further bars any US-based financial entities from using crypto mixing services to conceal the origin of the crypto funds or even use privacy coins. The bill goes as far as banning financial companies from ever using any tools or technologies with anonymity features.
The reporting requirements will also be bolstered, as not only will virtual asset service providers (VASPs) have to fulfill FinCEN's existing rules and Bank Secrecy Act's mandatory reporting for transactions over $10,000, but they will also have to fulfill additional reporting obligations if the new bill becomes a law.
The crypto industry outright rejected Sen. Warren and Marshall's proposed crypto bill, with many calling it regressive. Most crypto enthusiasts said that the bill does nothing to prevent any FTX-like events from occurring in the future.
In fact, crypto users pointed out that the bill would do the exact opposite, as it would outlaw the self-custody of cryptocurrencies, leaving everyday crypto investors with no other option but to turn to centralized exchanges. Some industry leaders have even called the bill an attack on digital freedom and the very ideals of the United States.
Crypto users weren’t happy either with Sen. Warren’s statement about making the SEC the main regulator of cryptocurrencies.
The industry unanimously believes that the decision to use a centralized or decentralized solution should be left to the end user, and the government should have no say in it. And instead of putting extensive stress on the industry with over regulations, the government should act as an enabler.
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