Warren’s Crypto Surveillance Legislation Designed to Benefit Huge Banks

The proposed Digital Asset Anti-Money Laundering Act by the Massachusetts Senator Elizabeth Warren risks plunging crypto providers into shutdown, thus playing into the desires of the banking industry. The recent proposal portrays a trend by the Massachusetts Senator of introducing a new draft whenever she fails to secure approval of the anti-crypto bill. 

A review of Senator Warren by George Mason University’s Antonin Scalia Law School associate professor JW Verret profiles the politician as deploying messaging bills strategy. The crypto forensic accountant explains that such a trend arises when one introduces legislation aiming to attract media attention and reap additional fundraising unlike in the actual passage. 

Verret, who also serves in the advisory council of the Financial Accounting Standards Board (FASB) considers the Warren’s latest surveillance legislation threatens eroding crypto’s core principles entrenching freedom and personal sovereignty. 

Verret in Monday December 18 Cointelegraph publication dismisses Warren’s argument that the surveillance bill is critical towards combating illicit activities. A detailed scrutiny of the proposal illustrates its inherent potential to hamper crypto-related innovation. It has the potential to endanger user privacy, thus playing right into the big banks’ hands. 

Warren’s Bill Proposes Impractical Solutions Endangering Crypto Existence

Verret considers that the surveillance bill, co-sponsored  by Senator Roger Marshall of Kansas is founded on the premise that crypto assets are widely utilized to execute criminal activities including terrorist financing, ransomware attacks and launder money. The experienced legal expert considers that though bad actors have exploited the digital assets, the approach portrayed by the bill to consider developers and wallet providers as criminals is impractical and endangering innovations. 

The dangerous section of the proposal is mandating the digital asset developers honor the Bank Secrecy Act (BSA) provisions and Know Your Customer (KYC) requirements.  The requirements effectively burdens the law enforcement upon the software developers. He likens such requirements to obligating the automobile manufacturers with responsibility of knowing the road usage of their vehicles. 

The bill targets eliminating the privacy tools that safeguard the crypto community from the malicious actors. The crackdown targeting digital asset mixers and technologies that enhance anonymity threatens to erode the privacy rights enjoyed by the law-abiding citizens. 

The legal scholar pointed out that privacy constitutes a fundamental right and not a privilege that one could discard at will. The legal expert illustrated the case of early Bitcoin millionaires kidnapped following disclosures of the Bitcoin blockchain. Consequently, the proposal would leave the Bitcoiners and future crypto holders defenseless against the threats. 

Rethink Restrictive Approach, Target Specific Criminal Actors Utilizing Crypto

The argument by Warren that crypto threatens national security, thus necessary to impose the onerous regulations. Its enactment would erode crypto competitiveness, thus making it challenging for the digital assets to run on a level playing field. 

Verret admits that the argument that criminal entities and rogue nations are utilizing crypto is a valid argument. Nonetheless, he invites the proponents of imposing sanctions towards crypto to rethink the approach since technology should not suffer for the actions of a select few. 

Verret wonders the validity of Warren’s proposal that appears overly restrictive towards crypto. The professor faults the two co-sponsors for their failure to apply a similar argument towards cash that has often been utilized in financing illegal activities for centuries. Imposing a ban on cash would constitute an overreaction just as the restrictive stance proposed by Warren. 

Verret faults the Warren’s surveillance bill approach targeting the unhosted digital wallets. Warren considers the unhosted wallets facilitate individuals to bypass sanctions checks and anti-money laundering measures deployed. 

Although averting illicit transactions is noble, the proposal to have banks and other providers of money service to verify customer identities and filing reports on particular transactions is burdensome. 

Verret decries that obligating individuals to furnish personal information in each transaction contradicts the principles of pseudonymity and privacy that drew the masses to cryptocurrencies. Instead, regulation should not stamp on the individual rights. 

Overregulating Cryptocurrency Threatens Plunging Users into Unregulated Segments

Verret warns that overregulating risks chasing users into the unregulated segments that often is challenging to track contexts. Potential overreach could arise when extending BSA rules mandating filing individuals involved in $10,000 crypto-based transactions to file the Foreign Bank and Financial Accounts reports. Such poses unnecessary burdens to individuals utilizing the crypto assets to execute legitimate purposes including cross-border remittances and investments. 

The requirement to have the US Financial Crimes Enforcement Network (FCEN) guide on handling anonymized crypto typically misunderstands the transparency and pseudonymity tenets in blockchain technology. The attempts to eliminate pseudonymity risks jeopardizing the key features considered the pillars of secure and appealing blockchain. 

Verret faults the sledgehammer approach deployed by Warren’s bill to the challenges where targeting specific criminal activities and parties would reasonably resolve. The present AML system has seen the majority of crypto exchanges comply with the provisions to effectively interdicting illicit crypto usage restricting noncompliance to a few isolated instances.

Warren’s bill is a huge threat to the crypto community  and stifling potential harbored by transformative technology. Instead, the legislators should pursue a balanced and effective solution to address the concerns without stifling the potential of this transformative technology.

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