New US Crypto AML Bill May Bar Banks From Transacting

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For what seemed like the most significant financial task, lawmakers in the US recently gathered to shape the future of crypto in America. The all-crucial hearing titled “Crypto crash: Why Financial System Safeguards are needed for crypto assets,” held on the 14th of February sought to spell out what went wrong with the recent spate of bankruptcy filings and how to make it right in the future with appropriate regulatory policies.

Senator Sherrod Brown, the chairman of the house committee on banking and finance, began proceedings with a statement that the current “crypto nightmare isn’t over yet, and we are still learning the full extent of the damage.” In his opening remarks, he took a swipe at crypto’s obvious absence from the 57th Superbowl after it had dominated the half-time advertisement section of the game in 2021.

‘The Elephant in the room’

Up next was Deputy Chairman, Senator Tim Scott (R. South Carolina), who wasted no time in calling out the “elephant in the room” in reference to Gary Gensler, the chairman of the US Securities and Exchange Commission (SEC). Gensler had testified in front of the house in September last year, but Senator Scott believes another appearance is due in the light of the recent FTX crash. The crypto-friendly senator labelled the SEC “asleep on the wheel”, demanding an explanation for the general lack of regulatory oversight that has caused recent bankruptcy contagion.

A Battle For Qualified Regulators

At the hearing, three special guests—Lee Reiners of the Duke Financial Economics Center, Linda Jeng of the Crypto Council for Innovation, and Professor Yesha Yadav from Vanderbilt University—proposed different methods of approach to regulation around the space. Crypto-skeptic Lee tipped the SEC as most befitting for the role, adding that congress designates all cryptos as securities.

Linda Jeng sought the committee to create a solid set of guiding principles consistent with modern times and Yesha wants the committee to put a decent amount of responsibility for safety and consumer protection in the hands of exchanges, all under an umbrella of state oversight.

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Other Takeaways

Many lawmakers supported enforcing disclosures “written in plain English” for crypto.

Linda Jeng wants consumers accorded property rights when they purchase digital assets to protect them during bankruptcy. She also pushed for CBDCs and Stablecoins to be removed from the regulatory oversight of the SEC.

Reiners kicked against banks holding crypto in their balance sheets. Senator Tillis confirmed a proof of reserves bill that tackles comingling of customer funds, and Senator Elizabeth Warren sought to reintroduce her anti-money laundering bill to enforce traditional finance AML/KYC laws across the entire spectrum of crypto.