As regulators continue to scrutinize the crypto industry, Senators Elizabeth Warren (D-MA) and Roger Marshall (R-KS) have introduced the Digital Asset Anti-Money Laundering Act. This legislation aims to close loopholes that allow bad actors to exploit cryptocurrencies for money laundering purposes. The proposed law, however, is seemingly at odds with the reality of the situation.
Money laundering – the filtering of ill-gotten gains through the traditional financial system – is indeed illegal. While a portion of money laundering occurs through cryptocurrencies, most cases still involve fiat currencies. Law enforcement agencies have demonstrated their capability in identifying and prosecuting those who break money laundering laws using crypto assets.
The debate on Capitol Hill, though, might lead one to believe that money laundering is an issue unique to cryptocurrencies, occurring at an unprecedented scale. Furthermore, it seems to imply that law enforcement is incapable of dealing with this issue due to outdated legislation.
The authors of the Digital Asset Anti-Money Laundering Act appear to have identified an illegal act that has salience with the American public and is broadly opposed – money laundering. They leverage the fact that blockchain technology and cryptocurrencies remain relatively unfamiliar to many people.
By linking an undesirable label to an unfamiliar concept, the legislators are pursuing a long-term strategy of banning crypto under the guise of an anti-money laundering policy. It’s essential to scrutinize the necessity and purpose of the proposed legislation, as well as potential alternatives for tackling money laundering without harming the underlying technology.
The suggestion that the Warren-Marshall bill identifies gaps in current anti-money laundering laws contradicts the successful efforts of law enforcement agencies in identifying, arresting, and charging those who use cryptocurrencies for money laundering purposes.
A recent report by the U.S. Department of the Treasury highlighted that while money laundering using cryptocurrencies does occur, criminals still prefer to launder money through fiat currency. The reason being that using fiat currency in opaque jurisdictions is generally easier and less likely to be detected by law enforcement than traceable blockchain-based transactions.
So, is the Warren-Marshall legislation necessary, and does