The Bank Policy Institute, a trade group for lenders that Warren often blasts, threw its weight behind bipartisan legislation that the Massachusetts Democrat and three of her Senate colleagues reintroduced this week. The bill aims to force the crypto industry to comply with tougher rules for combating money laundering and terrorism financing.The three colleagues are Joe Manchin (D-WV), Roger Marshall (R-KS) and Lindsey Graham (R-SC). It is worth noting that Senators Warren and Graham also have a bill to tighten regulation of big tech, described in their "Guest Essay" for the New York Times entitled When It Comes to Big Tech, Enough Is Enough.
“The existing anti-money laundering and Bank Secrecy Act framework must account for digital assets, and we look forward to engaging in this process to defend our nation’s financial system against illicit finance in all its forms,” BPI said in a statement.
Follow me below the fold for the sting in this bill's tail
Among the things that Versprille reports is that:
The measure would require digital-asset wallet providers, miners and others that validate and secure transactions on a blockchain to keep tabs of their customers’ identities.That sounds reasonable, doesn't it? So who are the customers of "miners and others that validate and secure transactions on a blockchain"?
Merriam-Webster's definition of "customer" is "one that purchases a commodity or service". When a transaction is submitted to a blockchain it must include a fee, which is paid by the submitter to the validator. This clearly represents a purchase of the service of validating the transaction. Thus the submitter of each transaction is a customer of the validator, and under the bill in question the validator must "keep tabs of" their identity.
It would seem that the bill would therefore require miners and validators within US jurisdiction to blacklist transactions that involve a wallet the identity of whose owner is unclear. Thus it appears that the bill implements Nicholas Weaver's proposal from two years ago in How to Start Disrupting Cryptocurrencies: “Mining” Is Money Transmission:
So a miner who creates a block is explicitly making decisions about which transactions to confirm. This successful miner ... is a money transmitter.US law requires money transmitters to apply the Know Your Customer/Anti-Money-Laundering (KYC/AML) rules, thus Weaver argued that confirming transactions for wallets requires knowing the identity of the wallet owner. And he pointed out that miners could not argue that this was impossible because:
There is proof that one can attempt to produce a “sanctions-compliant” mining pool. Marathon Digital Holdings is a small mining pool (roughly 1 percent of the current mining rate). During the month of May, Marathon used a risk-scoring method to select transactions, intending to create Bitcoin blocks untainted by money laundering or other criminal activity. Yet they stopped doing this because the larger Bitcoin community objects to the idea of attempting to restrict Bitcoin to legal uses!Perhaps the validators believe that because the Financial Crimes Enforcement Network hasn't enforced the KYC/AML rules against them, the DoJ wouldn't use this proposed law against them either. But it easy to see why the Wall Street banks are getting behind a law to subject their competitors to the same rules they have to obey.