The bi-partisan Anti-Money Laundering (AML) bill that covers “decentralized entities” such as decentralized finance protocols (DeFi) and decentralized autonomous organizations (DAOs) will be reintroduced in Congress, according to United States Senator Elizabeth Warren.
Warren, a vocal crypto critic, argued in a February 14 Senate Banking Committee hearing titled, “Crypto Crash: Why Financial System Safeguards are Needed for Digital Assets,” that the crypto community wants decentralized entities that use code to be exempt from AML requirements. :
“In other words, they want a big loophole for DeFi written into the law so they can launder money when drug lords or terrorists pay.”
Because of this, Warren said he will reintroduce the Digital Asset Anti-Money Laundering Act of 2022 which was first introduced on December 15, 2022. It was read twice before being referred to the Senate Banking Committee and did not gain traction.
If enacted, the seven-page bill would ban financial institutions from using digital asset mixers, such as Tornado Cash, designed to hide blockchain data.
This will also result in non-hosted wallets, miners and validators having to write and enforce AML policies.
The senator noted the current AML legislation “does not cover a large part 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:
“He said we’re making this shift, quote, ‘to remove ourselves from organized activities.’ Translation: Money laundering here.
Warren claimed that “big financial criminals love crypto” and argued that crypto is the “method of choice for international drug trafficking,” North Korean hackers and ransomware attackers, adding:
“The crypto market took $20 billion last year in illegal transactions, and we only know a part of it.”
This figure is supported by a January 12 report from the blockchain analytics company Chainalysis, which found that the total value of cryptocurrency received from unauthorized addresses will reach $20.1 billion throughout 2022.
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According to a United Nations official speaking at a meeting of the Counter-Terrorism Committee in October 2022, cash is still the preferred option for financing terrorists, although they are starting to move more often to crypto.
North Korean hackers working with the Lazarus Group also faced obstacles in trying to use crypto with exchanges Binance and Huobi, which freed accounts believed to be linked to the hacking group.