On December 11, the bill "The Digital Asset Anti-Money Laundering Act" (AML) received the support of five more members of the US Senate. The new law implies strengthening regulatory control over the cryptosphere; it will oblige validator miners and other blockchain participants to implement the Know Your Customer (KYC) procedure, which is a difficult technical task and also contradicts the "spirit" of cryptocurrencies.
What is The Digital Asset Anti-Money Laundering Act
As the author of the law, Elizabeth Warren, states, this initiative responds to the The Treasury Department’s request for clear legislation that not only brings cryptocurrencies into the legal framework but also protects US citizens while stopping the use of cryptocurrencies for money laundering and crime.
The most discussed and controversial clause of the bill revolves around extending the Bank Secrecy Act’s provisions to a wide range of participants in the crypto industry.
This entails crypto wallets providers, miners, validators, and other network participants that carry out and facilitate transactions with crypto must implement KYC procedures and collect user data. As a reminder, those procedures usually involve providing scans of documents such as passport, driving licence, and so on.
The rest of the points are in the text of the bill, which can be found here.
What’s new for the AML bill in December 2023
AML’s first version was introduced in December 2022, but it failed to gain traction in the Senate. A revised version was introduced again in August 2023. In September, it became known that the law was supported by 11 more senators.
On December 11, five more politicians joined the initiative. This information encouraged the community to once again pay attention to the bill.
Judging by the press release, at the moment, the bill is supported by 19 senators. There are 100 members of the Senate, 48 of whom are Democrats, 49 Republicans and 3 independents. It is noteworthy that it is bipartisan, which means that there are also representatives of the Republican Party who supported it, which is strange because they are usually more crypto-friendly.
What senators consider on crypto
Senator Elizabeth Warren has long been an opponent of cryptocurrencies. Back in June 2021, in an interview with Bloomberg, she called the cryptosphere the "Wild West" and considered cryptocurrencies "not a good way to buy and sell things and not a good investment or an environmental disaster.".
In a recent press release, Warren, the author of the act, says that cryptocurrencies allow fraudsters and terrorists "to launder billions in stolen funds". At the same time, she admits that this "bipartisan bill is the toughest proposal" that greatly expands the power of regulators.
Another senator, Van Hollen, said that cryptocurrencies should be regulated just like traditional banks "to protect Americans".
Criticism of the AML bill within the community: bad prospects for crypto in the US
Members of the crypto community have not met the initiative with joy. Instead, Alex Thorn, Head of Firmwide Research at Galaxy, a digital asset investment and advisory firm, believes that such laws "effectively ban crypto in America" and urges concerned citizens to contact their senators.
He also noted that it is impossible for miners and validators to perform KYC for every transaction on the blockchain. In his opinion, the use of the term "customer," which they need to "know," is incorrect.
Neeraj Agrawal, a member of Coin Center, a non-profit organisation focused on the policy issues facing cryptocurrencies, said that this law is "a direct attack on technological progress and also a direct attack on our personal privacy and autonomy.".
Neeraj Agrawal also suggests that such initiatives, under the pretext of protecting citizens and solving problems with money laundering, essentially mean a transition to dictatorship and control over society.
What will happen to the industry if the AML bill passes in its current form
The passing of the law in its current form will change the cryptographic landscape drastically. Apparently, hot wallets like MetaMask or Trust Wallet will have to identify their users. This will also apply to old hardware wallets such as Ledger or Trezor.
More absurdly, validators and miners will also somehow have to identify everyone whose transactions they add to the blockchain, which is poorly conceivable in principle.
At the same time, the law does not mention decentralised finance (DeFi) and the possible encouragement of decentralised applications (dApps) developers to implement KYC procedures. Although, this seems the most technically feasible, similar to how centralised exchanges work. Recall the recent FUD regarding the introduction of KYC on a future version of Uniswap.
When will the AML bill be passed
A final decision on this bill has not yet been made. Warren's initiative may not be passed by the Senate at all. However, there is a worrying trend: as time goes on, it is gaining more and more approval among other members of the Senate.
But an interesting statistic about Elizabeth Warren's career plays against the possible passage of this legislation. According to the GovTrack service, she has introduced 330 bills during her 11 years in office. 10 of them became part of more global initiatives, and only one eventually passed.
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