United States Representative French Hill, who chairs the House Financial Services Subcommittee on Digital Assets, Financial Technology and Inclusion, has raised concerns about a specific aspect of Senator Elizabeth Warren’s bill on digital assets. During a hearing on “Crypto Crime in Context” on February 15, Hill and other lawmakers questioned experts from the crypto industry about subjecting digital asset miners and validators to the same regulations that currently apply to financial institutions. Senator Warren’s bill, known as the Digital Asset Anti-Money Laundering Act, aims to amend the Bank Secrecy Act in order to implement new standards for crypto providers, with the goal of combating the financing of terrorist organizations.
Representative Hill suggested that altering the requirements for miners and validators would not effectively prevent terrorist organizations from using crypto. However, he did not explicitly mention Senator Warren’s bill during the hearing. 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, rather than through miners and validators. Mosier compared the role of miners and validators to that of internet service providers, stating that they simply process data and therefore should not be subject to Know Your Customer requirements.
This hearing was the second conducted by the House committee in the past four months that specifically addressed the illicit uses of cryptocurrency, with a focus on terrorist financing. Representative Patrick McHenry, who chairs the full committee, announced in December that he will not seek reelection in 2024, potentially leading to a change in committee leadership depending on the outcome of the election.
The issue of crypto-financing terrorism has gained increasing attention in the United States government following the October 7 attack by Hamas on Israel. Many individuals have expressed support for Senator Warren’s proposed bill, calling for action to be taken. According to Chainalysis, 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.
The fear and uncertainty among lawmakers is driving the proposed regulations on crypto in the United States.