Senate Banking Committee

Sen. Warren vows reintroduction of AML bill that extends to DAOs and DeFi

While the Senator did not expand on other details of the upcoming bill, she suggested that DeFi should not be exempt from AML laws.

A bi-partisan Anti-Money Laundering (AML) bill that covers “decentralized entities” such as decentralized finance (DeFi) protocols and decentralized autonomous organizations (DAOs) will soon be reintroduced to Congress, according to United States Senator Elizabeth Warren.

Warren, a vocal crypto critic, argued at the Feb. 14 Senate Banking Committee’s hearing entitled, “Crypto Crash: Why Financial System Safeguards are Needed for Digital Assets,” that the crypto community wants decentralized entities running on code to be exempt from AML requirements:

“In other words, they want a giant loophole for DeFi written into the law so they can launder money whenever a drug lord or a terrorist pays them to do so.”

Due to this, Warren said she would re-introduce the Digital Asset Anti-Money Laundering Act of 2022 that she first introduced on Dec. 15, 2022. It was read twice before being referred to the Senate Banking Committee and has received no further traction.

If legislated as it was, the seven-page bill would have prohibited financial institutions from using digital asset mixers, such as Tornado Cash, designed to obscure blockchain data.

Senator Warren speaking at the “Crypto Crash” committee hearing on Feb. 14. Source: U.S. Senate Banking Committee.

It also would have resulted in unhosted wallets, miners and validators being required to write and implement AML policies.

The Senator noted current AML laws “don’t cover big parts of the crypto industry” and claimed crypto exchange ShapeShift took advantage of the lack of regulation when it restructured itself as a DeFi platform in July 2021, adding:

“They said we’re making this shift, quote, ‘to remove itself from regulated activity.’ Translation: Launder your money here.”

Warren claimed “big-time financial criminals love crypto” and argued that crypto was “the method of choice for international drug traffickers,” North Korean hackers and ransomware attackers, adding:

“The crypto market took in $20 billion last year in illicit transactions, and that’s only the part we know about.”

These figures are backed up by a Jan. 12 report from blockchain analytics firm Chainalysis, which found that the total cryptocurrency value received by illicit addresses reached $20.1 billion throughout 2022.

Related: US lawmakers and experts debate SEC’s role in crypto regulation

According to a United Nations official speaking at a Counter-Terrorism Committee meeting in October 2022, cash is still the preferred choice for financing terrorists, although they are beginning to turn to crypto more frequently.

North Korean hackers operating with the Lazarus Group have also faced headwinds attempting to use crypto with the exchanges Binance and Huobi, who froze accounts they deemed to be linked to the hacker group.

US senator: There’s ‘no reason why’ crypto should exist

Jon Tester is one of many Democratic senators slamming crypto of late, arguing that the sector is backed by nothing and provides nothing, so there’s “no reason” why it should exist.

Another crypto-skeptic United States senator is on the loose, with Democrat Jon Tester boldly stating that he sees “no reason why” crypto should exist.

Tester is the senior senator of Montana and has held a seat there since 2007. He also serves on the Senate Banking Committee, which is one of the key players involved in the ongoing debate over U.S. crypto regulation.

During a Dec. 11 appearance on NBC’s Meet the Press, Tester argued that as crypto has no real value at all, the sector shouldn’t be regulated, as that would give it legitimacy.

“It’s not been able to pass the smell test for me. I have not been able to find anybody who’s been able to explain to me what’s there other than synthetics […] which means nothing,” he said, adding that:

“The problem is if we regulate it, and I pointed this out to some of the regulators here a week or two ago, if we regulated it, it may give it the ability of people to think it’s real.”

In line with such thinking, Tester then went on to state that he sees “no reason why this stuff should exist” at all.

The crypto community wasn’t shy about slamming the senator’s anti-crypto remarks and his self-admitted lack of crypto knowledge, with user @BS0064 sayingthat it’s “always good to see people who have no idea what they’re talking about to express really strong opinions on the matter.”

Also, @blocknonprofit argued, “it is real… imagine all those cryptos are just tech stocks not traded on traditional exchanges used today.”

Tester’s most-recent testy comments come just a couple of weeks after he told media startup Semafor that the sector was “all bullshit” and that he can’t “figure out what supports it.”

Semafor’s Dec. 1 article was also littered with negative crypto stances from a bunch of Democrat senators, with crypto-hater Elizabeth Warren going in hard by noting: “finally, there are more people blowing the bullshit whistle.”

Bernie Sanders was at least more diplomatic, stating that he’s “not a big fan” of crypto.

Related: Senate Banking Committee Democrats warn SoFi about meeting its compliance deadline

Commenting on the article via Twitter, Semafor Washington editor Jordan Weissmann suggested that since the FTX debacle went down, “Dems suddenly feel free to say what they really think about the crypto industry.”