U.S. government revise NDAA, impacting cryptocurrency anti-money laundering measures

Category: Blockchain Crypto Regulatory
Posted by Content Team

The U.S. government has removed two clauses from the National Defense Authorization Act (NDAA) that addressed concerns about cryptocurrency being used for money laundering.

The NDAA, governing how the country’s defense department uses federal funds, saw the removal of two clauses focused on monitoring and reporting crypto activities to combat illegal actions.

The first clause required the U.S. Secretary of the Treasury to work with banks and government regulators to create a thorough review system for crypto in financial institutions. The second clause aimed to prevent confidential crypto transactions, particularly using crypto mixers and tumblers. This involved generating a report detailing the extent of crypto activity connected to groups facing sanctions and discussing the regulations of other countries.

On July 28, Cointelegraph said that the U.S. Senate approved the NDAA worth $886 billion. The changes in crypto were inspired by the Digital Asset Anti-Money Laundering Act and the Responsible Financial Innovation Act of 2022. A group of senators suggested the NDAA changes, including Cynthia Lummis, Elizabeth Warren, Kirsten Gillibrand, and Roger Marshall. These changes aim to prevent another incident of financial scandal like what happened with FTX.

Lately, the U.S. government has been thinking about issues with illegal money activities and supporting terrorism using crypto. On November 15, the Financial Services Committee of the U.S. House of Representatives had a meeting to talk about illegal activities in the crypto world.

They also looked at how crypto exchanges and decentralized finance providers are working to stop illegal money activities and support terrorism.

Reintroduction of crypto anti-money laundering bill

Previously, two U.S. senators, Elizabeth Warren and Roger Marshall, reintroduced the ‘Digital Asset Anti-Money Laundering Act of 2023’ after a delay. They were joined by Joe Manchin and Lindsey Graham as supporters, focusing more on industry players like miners and validators. If the law passes, everyone involved in cryptocurrency must report transactions over $10,000.

The senators, who have consistently pushed for stricter industry regulations, reintroduced their anti-money laundering bill. This reintroduction follows their initial proposal in December, which aimed to make U.S. cryptocurrency businesses follow the same customer identification rules as banks to prevent money laundering.

However, the Chamber of Digital Commerce opposed the bill, saying it might slow down innovation in digital assets in the U.S. because it puts extra responsibilities on industry participants.

For example, digital asset validators and miners do not typically engage in activities that qualify them as financial institutions under the Financial Crimes Enforcement Network’s (FinCEN) definition,” said the Chamber of Digital Commerce in a statement.

The statement explained that FinCEN’s regulations are intended for entities involved in traditional financial activities like accepting deposits, issuing loans, or engaging in various forms of lending or financial intermediation. It emphasized that digital asset validators and miners typically focus on the technical operation of blockchain networks and do not offer financial services to customers.

The statement also highlighted concerns that registering as a financial institution would place a substantial compliance cost burden on the digital asset industry. This could lead to firms leaving the U.S., resulting in a loss of skilled developers and technical experts.

Additionally, it pointed out regulatory developments in other parts of Asia, noting that Japan implemented anti-money laundering rules for cryptocurrency transactions earlier in the year.

South Korea adopted the FATF’s travel rule last year. In March of this year, India took a significant step toward regulating the cryptocurrency industry by expanding the Prevention of Money Laundering Act to cover digital assets.