New US Senate Bill Tackles Money Laundering via DeFi, Crypto ATMs

<p>A bipartisan group of four senators today (Wednesday) introduced the Crypto-Asset National Security Enhancement and Enforcement (CANSEE) Bill to the United States Senate. In <a href="https://www.reed.senate.gov/news/releases/bipartisan-us-senators-unveil-crypto-anti-money-laundering-bill-to-stop-illicit-transfers" target="_blank" rel="follow">a statement</a>, they explained that the goal of the bill is to
subject decentralized finance (DeFi) services to the same anti-money laundering (AML)
and economic sanctions compliance obligations imposed on banks, securities
brokerages and even centralized crypto exchanges, such as
Binance and Coinbase. </p><p>New Bill to End 'Special Treatment' for DeFi </p><p>Specifically, the bill was sponsored by Democratic Senator Jack Reed, with support from fellow Democrat, Mark Warner and Republican lawmakers Mike Rounds
and Mitt Romney. In addition to DeFi, the new bill is seeking to
empower public authorities under the US Treasury Department to fight money
laundering threats as these agencies are currently
limited to transactions conducted under the traditional banking system.</p><p>Furthermore,
the new bill proposes that crypto ‘kiosks’ or Automated
Teller Machine operators must verify the identities of parties that engage in crypto exchange activities
on their platform in order to ‘improve traceability of funds’.</p><blockquote><p lang="en" dir="ltr">Crypto ATM &amp; decentralized finance (DeFi) services are being used as tools by money launderers &amp; sanction evaders. To reduce nat’l &amp; economic security risks, I’m joining colleagues to intro CANSEE Act to bolster <a href="https://twitter.com/USTreasury?ref_src=twsrc%5Etfw">@USTreasury</a> authorities &amp; protect financial system integrity. <a href="https://t.co/DduQRqvd5u">pic.twitter.com/DduQRqvd5u</a></p>— Senator Jack Reed (@SenJackReed) <a href="https://twitter.com/SenJackReed/status/1681738388729131008?ref_src=twsrc%5Etfw">July 19, 2023</a></blockquote><p>DeFi
platforms are blockchain-based applications such as decentralized exchanges
that enable users to engage in peer-to-peer financial transactions. However,
the legislators stated that criminal actors are deploying the anonymity
provided by DeFi platforms and gaps in United States’ AML regulatory framework
to launder criminal proceeds and fund more crime. </p><p>“These
requirements will close an attractive avenue for money laundering that has been
routinely exploited over the past several months by the North Korean
government, Chinese chemicals manufacturers, Mexican drug cartels,
cybercriminals, ransomware attackers, scammers, and a host of other bad
actors,” the legislators explained.</p><p>Through the
CANSEE Bill, the lawmakers want the ‘special treatment for DeFi’ to end. The proposed legislation includes provisions that will require DeFi platforms to
“meet basic obligations, most notably to maintain AML programs, conduct due
diligence on their customers, and report suspicious transactions to FinCEN,” the legislators added.</p><p>“The
legislation also makes clear that if a sanctioned person, like a Russian
oligarch, uses a DeFi service to evade U.S. sanctions, then anyone who controls
that project will be liable for facilitating that violation,” they further elaborated. “If nobody controls a DeFi service, then — as a
backstop — anyone who invests more than $25 million in developing the project
will be responsible for these obligations.”</p><p><a href="https://www.financemagnates.com/" target="_blank" rel="follow">Finance
Magnates</a>conducted a check that shows the bill, principally sponsored by Reed, has been
<a href="https://www.congress.gov/bill/118th-congress/senate-bill/2355/text?s=3&amp;r=1" target="_blank" rel="follow">listed as ‘introduced’</a> on Congress.Gov, the official website of the United
States Congress. However, the full text has not been uploaded. </p><p>“A bill to
clarify the applicability of sanctions and anti-money laundering compliance
obligations to United States persons in the decentralized finance technology
sector and virtual currency kiosk operators, and for other purposes,” the website’s
description of the
bill reads.</p><p>New Bill Draws Criticism </p><p> However, the new bill has generated some criticism on social media. A DeFi advocacy group, DeFi Education Fund, reacting to provisions of the bill noted that there are "far better options” to fight abuse of DeFi platforms. </p><blockquote><p lang="en" dir="ltr">1/ While we are supportive of effective measures to combat the illicit use of DeFi, the bill introduced today essentially says “centralize, shut down, or get out of the United States.”<a href="https://t.co/qnD1iBoyzT">https://t.co/qnD1iBoyzT</a></p>— DeFi Education Fund (@fund_defi) <a href="https://twitter.com/fund_defi/status/1681667322115760132?ref_src=twsrc%5Etfw">July 19, 2023</a></blockquote><p> Also reacting, Brandon Ferrick, the Co-Founder of B+J Studios, a platform that develops blockchain-based solutions for mainstream consumer and institutional-grade use, criticized the provision that seeks to hold investors holding over $25 million in a DeFi project accountable for violating sanctions.</p><blockquote><p lang="en" dir="ltr">The Crypto-Asset National Security Enhancement and Enforcement Act of 2023 defines "Control" as including the power, directly or indirectly, to direct a change in the code or other terms governing the protocol, through ownership of tokens, admin privileges, or other abilities. <a href="https://t.co/tULgel1G6s">pic.twitter.com/tULgel1G6s</a></p>— Mr. Lawyer