Warren's Crypto Bill: Unconstitutional and Unlikely to Pass

• Sen. Elizabeth Warren Advocates for Stronger Crypto Regulation
• Digital Asset Anti-Money Laundering Act
• Challenges to the Act
• Speculations Surrounding the Proposal
• Implications for the Crypto Industry
• Calls for Increased Transparency

Sen. Elizabeth Warren Advocates for Stronger Crypto Regulation

Known for her strong stance on cryptocurrency regulation, Sen. Elizabeth Warren (D-Mass.) is pushing for stricter control on crypto's alleged use for illegal financing. In an attempt to tighten the reins, she submitted a bill titled Digital Asset Anti-Money Laundering Act to the Senate for review.

Digital Asset Anti-Money Laundering Act

On a recent Monday, five Democratic senators joined forces to back Sen. Warren's newly proposed Act. If successful, the Act will see Bank Secrecy Act requirements, including know-your-customer (KYC) rules, apply to sectors of the crypto industry such as miners, validators, and wallet providers. The backing senators in question are Sens. Raphael Warnock (D-GA), Laphonza Butler (D-CA), and Chris Van Hollen (D-MD), all of whom are colleagues of Warren on the Senate Banking Committee. This committee has significant leverage in the Senate, responsible for passing laws that oversee one of the U.S.'s largest economic sectors and influencing future legislative proposals.

Challenges to the Act

Despite the intention behind the bill, it is predicted to face substantial resistance due to factors such as partisan politics, internal disputes, and administrative stagnation. This resistance speaks not only for the crypto industry, who have demonstrated robust opposition to the bill, but also the American public who could potentially face concerning conditions attached to this Act.

The Act is under scrutiny, with critics arguing that it could effectively make crypto usage illegal in the U.S. and impose severe restrictions on code development aimed at providing similar privacy benefits to physical money. Lobbyists, such as those at Coin Center, have also suggested the Act could be unconstitutional.

Speculations Surrounding the Proposal

Despite these criticisms, it's important to note that the bill's introduction comes at a crucial time. The proposal's aim of increasing surveillance over popular digital technologies mirrors the controversial implications of another potentially unconstitutional congressional proposal. As Elizabeth Goitein, co-director of the Liberty and National Security Program at the Brennan Center for Justice, noted, the FISA Reform and Reauthorization Act of 2023 proposes expanding surveillance within the United States to an unprecedented level.

Implications for the Crypto Industry

Going beyond centralized exchanges, the Act proposed by Warren could extend reporting requirements to almost all areas of the crypto industry, including node operators and software developers. This introduces complications, as collection of user data in these sections of the industry seems offbeat.

Regardless of the Act's potential effectiveness or the merit of applying the Bank Secrecy Act's expansion as a solution, the bill's intent carries significant weight. It seems that Warren intends to reinforce public perception of cryptocurrency's ties with illegal activity, simultaneously attempting to skew public opinion against the crypto industry at large.

Calls for Increased Transparency

Sen. Warren's new co-sponsor, Sen. Van Hollen, argues for applying the same rules of transparency to the crypto industry as are currently applied to traditional banking, in order to prevent abuse of cryptocurrencies for illicit activities. However, this perspective does not take into account the proposed method of achieving this equality: by criminalizing communications. As Goitein notes, ultimately, it is not the government's stated intent, but the actual legal provisions allowed by the bill that matter most.

Edited by Jonathan Stoker