New Digital Asset Bill From Senator Warren Targets Self-custody Wallets
The “Digital Asset Anti-Money Laundering Act of 2022” was just introduced by Senators Elizabeth Warren (D-Mass) and Roger Marshall (R-Kan) and would significantly affect the privacy of Bitcoin and cryptocurrency users.
If passed, the measure will mandate the implementation of know-your-customer (KYC) systems for miners, wallet providers, and self-custodial wallet providers. In an effort to restrict users’ ability to preserve their privacy, it would also forbid financial institutions from interacting with privacy solution tools like CoinJoin.
While the bill focuses on measures that prevent money laundering, services like CoinJoin simply allow users to utilize Bitcoin in a manner that is similar to actual cash. In other words, the bank has minimal awareness of what each user does with their funds when they withdraw it from an ATM and solutions like CoinJoin would allow this same ability for Bitcoin and other cryptocurrencies.
Additionally, without a warrant or official request, regulatory organizations would be permitted to file reports and monitor users.
The bill also calls for a “rule classifying custodial and unhosted wallet providers, cryptocurrency miners, validators, or other nodes who may act to validate or secure third-party transactions, independent network participants, including MEV searchers, and other validators with control over network protocols as money service businesses.” This measure implies that Bitcoin nodes would be classified as well.
The bill also seeks for the Financial Crimes Enforcement Network (FinCEN) to enforce these new measures.
Senator Warren has stated in the past that she wants the Bitcoin and cryptocurrency markets to be regulated, and more so now after the demise of FTX.
The measure would be closely scrutinized since it would require unhosted wallet providers to register before publishing their products. Code has been proven to be free speech and these measures would be a violation of the first amendment.
Twitter account @BitcoinIsSaving pointed out that this bill would be “criminalizing free speech.”
Neeraj K. Agrawal from Coin Center also brought up that the bill “is an opportunistic, unconstitutional assault on cryptocurrency self custody, developers, and node operators” and does not include measures to prevent the next exchange from failing.