United States Congressman French Hill, who chairs the House Financial Services Subcommittee on Digital Assets, Financial Technology and Inclusion, has raised concerns about a provision in Senator Elizabeth Warren’s proposed legislation on digital assets.
During a hearing on “Crypto Crime in Context” held on February 15, Hill and other lawmakers questioned experts from the cryptocurrency industry about the possibility of imposing regulations on digital asset miners and validators similar to those applied to financial institutions. Senator Warren’s bill, the Digital Asset Anti-Money Laundering Act, seeks to amend the Bank Secrecy Act in order to impose new standards on crypto providers to combat the financing of terrorist organizations.
While not explicitly mentioning Senator Warren’s bill, Representative Hill suggested that changing the requirements for miners and validators would not effectively prevent terrorist organizations from using cryptocurrencies. According to Michael Mosier, co-founder of Arktouros and former acting director for the Financial Crimes Enforcement Network, the majority of illicit financing in the crypto industry occurs through centralized exchanges.
Mosier explained that miners and validators are essentially responsible for producing and verifying blocks, and they function similarly to internet service providers. Therefore, subjecting them to Know Your Customer regulations would not be appropriate, as they are simply processing data.
This hearing marks the second time in the past four months that the House committee has addressed the illicit use of cryptocurrencies, specifically focusing on the financing of terrorism. Representative Patrick McHenry, who chairs the full committee, announced in December that he will not seek re-election in 2024, potentially leading to a leadership change depending on the election outcome.
Following the October 7 attack by Hamas on Israel, there has been an increasing call for action within the US government to address the issue of cryptocurrencies being used to finance terrorism. Many individuals support Senator Warren’s proposed bill. However, a report by Chainalysis on February 15 indicated that the volume of cryptocurrency transactions associated with illicit activities decreased by over 29% from 2022 to 2023, dropping from $31.5 billion to $22.2 billion.
Overall, concerns and uncertainty among lawmakers are driving proposed regulations on cryptocurrencies in the United States.