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Senator Elizabeth Warren has introduced a bill in the US aimed at tightening regulations on cryptocurrencies. The proposed Digital Asset Anti-Money Laundering Act seeks to address concerns about the potential use of crypto in money laundering and other illegal activities. The bill would extend existing anti-money laundering laws and know-your-customer regulations to various entities in the digital asset space.
Under the proposed legislation, entities such as MSBs, crypto exchanges, wallet providers, miners, and validators would be required to verify their clients’ identities and report suspicious transactions, similar to the obligations of traditional banks. The bill also mandates identity verification for large peer-to-peer cryptocurrency transactions that occur through unregulated intermediaries or originate from unhosted wallets not associated with a regulated service.
Senator Warren emphasized the urgency of the bill by highlighting the use of digital assets by rogue nations like Iran, Russia, and North Korea to evade sanctions and fund illegal weapons programs. She pointed out that North Korea alone stole $1.7 billion in digital assets in 2022, making it one of the world’s most prolific crypto-criminals.
Supporters of the bill argue that extending anti-money laundering standards to digital assets will provide safeguards for states and users. However, critics express concerns that regulating the decentralized crypto ecosystem could compromise the anonymity and privacy that are characteristic of cryptocurrencies.
The crypto community counters this view by asserting that the transparency and traceability of crypto transactions on public blockchains could enhance the detection of illicit funding compared to cash transactions.
While the total amount of funds laundered globally is estimated to be in the trillions of dollars each year, the proportion attributed to crypto is relatively small. According to the Chainalysis Crypto Crime Report 2023, crypto-related money laundering accounts for approximately 0.24% of the total, significantly less than cash.