Senator Elizabeth Warren’s reintroduction of the Digital Assets Anti-Money Laundering Act has reignited a heated discussion on the regulation of digital assets. While the proposal is purported to protect consumers from scams, it is more likely to do just the opposite — making Americans more vulnerable by driving businesses overseas, weakening consumer choice and restricting the use of blockchain technology.
At first glance, the bill appears to have some merits in safeguarding digital asset users from scams, but upon closer examination, it appears to be a targeted attack on the cryptocurrency industry. There are serious flaws in the bill’s interpretation of the risk. While it is true that fraud and theft involving digital assets is an issue, only a small fraction of the amount of money laundered each year is done in cryptocurrency — approximately $10 billion compared to $800bn – $2tn in conventional currencies.
Furthermore, Warren is applying a one-size-fits-all approach to the regulation of digital assets that has the potential to displace and even criminalize legitimate use cases. The bill would require companies and individuals who develop blockchain technology to register as money service providers, adopt anti-money laundering policies and report customers to the Financial Crimes Enforcement Network — measures that could inadvertently expose innocent businesses to liabilities and regulatory scrutiny they’re not prepared for.
The proposed bill could also have a devastating effect on decentralized finance platforms, forcing these platforms to collect personal information from users and submit them to the government without warrant or probable cause. This is a clear violation of privacy that could threaten the security of users and increase the risk of cybercrime.
Moreover, the bill ignores the fact that miners who mine for themselves are providing services unrelated to transactions and does not distinguish between these entities and those who process transactions for others. This oversimplification could have a profound impact on self-mining individuals, driving them away from the industry and creating a significant barrier to entry for them.
Finally, Senator Warren’s bill is misguided in how it overlooks the fact that blockchain and related technologies are not the same as cryptocurrency and that not all cryptocurrencies are openly traded or usable for purchases. Brave, a web browser that blocks advertisements, is a perfect example of a closed-loop ecosystem that don’t need to subject its tokens to AML regulations. It would be absurd to regulate companies like Brave as banks or brokerages.
Elizabeth Warren’s proposed legislation could have far-reaching consequences — endangering Americans and fueling criminal activities with its heavy-handed regulations. It would drive legitimate users away from the industry and force businesses to close their doors or move overseas, eliminating competition in the banking and financial services sectors and reducing consumer choice. The digital asset industry will benefit more from focused regulation regarding exchanges between cryptocurrency and fiat currencies — which are the areas most vulnerable to financial crimes — rather than from this broad and flawed smear campaign.
